If fixed costs are $46,800,the unit selling price is $42,and the unit variable costs are $24,what is the break-even sales (units)if the variable costs are decreased by $2?
A) 2,127
B) 1,114
C) 2,340
D) 1,950

Question

Quizplus · Accepted Answer

The break-even point can be calculated using the formula:

Break-even point (units) = Fixed costs / Contribution margin per unit

Contribution margin per unit = Selling price per unit - Variable cost per unit

Using the given information:

Contribution margin per unit = $42 - $24 = $18

Break-even point (units) = $46,800 / $18 = 2,600 units

If the variable costs are decreased by $2, then the new contribution margin per unit becomes:

New contribution margin per unit = $42 - ($24 - $2) = $20

The new break-even point can now be calculated as:

New break-even point (units) = $46,800 / $20 = 2,340 units

Therefore, the answer is choice C.

If Fixed Costs Are $46,800,the Unit Selling Price Is $42,and