Lightfoot Company sells its product for $55 and has variable cost of $30 per unit.The total fixed costs are $25,000.What will be the effect on the breakeven point in units if variable cost increases by $10 due to an increase in the cost of direct materials?

Question

Quizplus · Accepted Answer

A)Breakeven point (before increase in cost of direct materials)= $25,000 / ($55 - $30)= 1,000 units
Breakeven point (after increase in cost of direct materials)= $25,000 / ($55 - $40)= 1,667 units
Increase in breakeven point = 1,667 - 1,000 = 667 units

Lightfoot Company Sells Its Product for $55 and Has Variable