Drenning Timber Products has estimated the following amounts for its next fiscal year:

What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?
A)The breakeven point will decrease by 2,046 units.
B)The breakeven point will decrease by 549 units.
C)The breakeven point will decrease by 750 units.
D)The breakeven point will increase by 549 units.

Question

Drenning Timber Products has estimated the following amounts for its next fiscal year:

What will happen to the breakeven point (in units)if Drenning can reduce fixed expenses by $22,500?
A)The breakeven point will decrease by 2,046 units. 
B)The breakeven point will decrease by 549 units. 
C)The breakeven point will decrease by 750 units. 
D)The breakeven point will increase by 549 units.

Quizplus · Accepted Answer

A)Contribution margin (before reduction in fixed expenses)= $41 - $30 = $11
Decrease breakeven point due to reduction in fixed expense = 22,500 / $11 = $2,046 units

Drenning Timber Products Has Estimated the Following Amounts for Its