Sunnyside Company currently sells its products for $500 per unit. Management is contemplating a 10% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change on a dollar per unit basis for next year (the company will pay the same amount for variable costs next year). Fixed expenses are $150,000 per year. If fixed costs were to decrease 10% during the current year and the new selling price goes into effect, how many units will need to be sold to break even?

Question

Quizplus · Accepted Answer

The Answer of Sunnyside Company currently sells its products for $500 per unit. Management is contemplating a 10% increase in the selling price for the next year. Variable costs are currently 20% of sales revenue and are not expected to change on a dollar per unit basis for next year (the company will pay the same amount for variable costs next year). Fixed expenses are $150,000 per year. If fixed costs were to decrease 10% during the current year and the new selling price goes into effect, how many units will need to be sold to break even?

Sunnyside Company Currently Sells Its Products for $500 Per Unit