If fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?
A) 6,000 units and 5,294 units
B) 18,000 units and 6,000 units
C) 18,000 units and 12,858 units
D) 9,000 units and 15,000 units

Question

Quizplus · Accepted Answer

The formula for calculating the break-even point in units is:

Break-even point (units) = Fixed costs / (Selling price per unit - Variable costs per unit)

Using the original values, we get:

Break-even point (units) = $450,000 / ($75 - $50)
Break-even point (units) = 18,000 units

To find the new break-even point, we need to use the new selling price of $85:

Break-even point (units) = $450,000 / ($85 - $50)
Break-even point (units) = 12,857.14 units

Rounding up to the nearest whole number, we get:

Old break-even point = 18,000 units
New break-even point = 12,858 units

Therefore, the correct answer is C.

If Fixed Costs Are $450,000, the Unit Selling Price Is