Question

Bonita Industries sells radios for $50 per unit. The fixed costs are $645000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $215000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Answer 1

Answer:

The new break even point in units = 34400 units

Step-by-step explanation:

Fixed cost ( F ) = $ 645000

Selling price ( s )= $ 50

Variable Cost ( v ) = $\frac{60}{100}$ × 50 = 30

Break Even Quantity ( $x_{BEP}$ ) = $\frac{F}{s - v}$

⇒ $x_{BEP}$ = $\frac{645000}{50 - 30}$

⇒ $x_{BEP}$ = $\frac{645000}{20}$

⇒ $x_{BEP}$ = 32250 units

Now the new fixed cost ( $F_{1}$ ) = $ 645000 + $ 215000 = $ 860000

Selling price ( s )= $ 50

Variable Cost ( v ) = $\frac{50}{100}$ × 50 = $ 25

Break Even Quantity ( $x_{BEP}$ ) = $\frac{F_{1} }{s - v}$

⇒ $x_{BEP}$ = $\frac{860000}{50 - 25}$

⇒ $x_{BEP}$ = 34400 units

Therefore, The new break even point in units = 34400 units