Question

Landstown College changed the budget for the next fiscal year. The new budget includes the following: Total fixed expenses $52,000 Selling price per unit $58 Variable expenses per unit $32 What is the impact on the breakeven sales in units if the new manager reduces fixed expenses by $10,000?

Answer 1

Answer:

385 decrease in breakeven units

Explanation:

to know what the impact on the breakeven sales in units is. you need to calculate the breakeven per case.

Calculate the breakeven when the fixed expenses are $52.000

1. Calculate the contribution margin = (selling price - variable expense) = (58-32)= 26

2.  Breakeven = (Fixed expenses / contibution margin ) = (52.000/26) = 2.000

Calculate the breakeven when the fixed expenses are $42.000

1. Calculate the contribution margin = (selling price - variable expense) = (58-32)= 26

2.  Breakeven = (Fixed expenses / contibution margin ) = (42.000/26) = 1.615

Calculate the difference in units

2000- 1615= 385