Merced Corporation has provided the following budgeted data:
-If the variable expense per unit is increased by 10 percent, and if the total fixed expenses are increased by $20,000 with the selling price remaining unchanged at $20, the break-even point in units will be:

Question

Merced Corporation has provided the following budgeted data: 
-If the variable expense per unit is increased by 10 percent, and if the total fixed expenses are increased by $20,000 with the selling price remaining unchanged at $20, the break-even point in units will be:

Quizplus · Accepted Answer

Using the formula:

Break-even point (units) = Total fixed expenses / (Selling price per unit - Variable expenses per unit)

We can calculate the current break-even point as follows:

Break-even point (units) = 150,000 / (20 - 12) = 12,500 units

If the variable expense per unit is increased by 10 percent, then the new variable expense per unit will be $13.20 (i.e., $12 x 110% = $13.20).

If the total fixed expenses are increased by $20,000, then the new total fixed expenses will be $170,000.

Using the same formula, we can calculate the new break-even point as follows:

Break-even point (units) = 170,000 / (20 - 13.20) = 17,647 units

Therefore, the answer is C) 17,647 units.

Merced Corporation Has Provided the Following Budgeted Data