Question

Currently, Unicy Company's unit selling price is $25, the variable cost is $17, and the total fixed costs are $85,000. A proposal is being evaluated to increase the selling price to $27.

a. compute the current break-even sales (in units)

______ units

b. compute the anticipated break-even sales (in uits), assuming that teh uit selling price is increased and al costs remain the constant.

_____ units

Answer 1

Answer:

(a) 10,625 units

(b) 8,500 units

Explanation:

(a) Contribution Per unit:

= Selling price - Variable cost

= $25 - $17

= $8

Current break-even sales (in units):

= Total Fixed costs ÷ Contribution Per unit

= $85,000 ÷ $8

= 10,625 units

(b) Assuming selling price per unit = $27

Contribution Per unit:

= Selling price - Variable cost

= $27 - $17

= $10

Anticipated break-even sales (in units):

= Total Fixed costs ÷ Contribution Per unit

= $85,000 ÷ $10

= 8,500 units