Ryan Company manufactures a single product. The product sells for $10. The variable manufacturing cost per unit is $2 and the variable selling cost is $2 per unit. Ryan incurs monthly fixed costs of $100,000 for manufacturing and $140,000 for administration and selling. Ryan Company is considering changes to its production and distribution procedures. If the changes are made, total variable costs (manufacturing and selling)will be $3 and total fixed costs (manufacturing, administration, and selling)will be $350,000 per month. The selling price will remain at $10. If the changes are made, the number of units required to break even will be:

Question

Quizplus · Accepted Answer

The break-even point is calculated as Fixed Costs / (Selling Price - Variable Costs). Initially, the break-even point is $240,000 / ($10 - $4) = 40,000 units. After changes, it is $350,000 / ($10 - $3) = 50,000 units. Therefore, the break-even point is greater than before.

Ryan Company Manufactures a Single Product