Question

12. Mia Enterprises sells a product for $90 per unit. The variable cost is $40 per unit, while fixed costs are $75,000. Determine the (a) break-even point in sales units, and (b) break-even point in sales units if the selling price increased to $100 per unit.

Answer 1

Answer:

1500 units  & 1250 units

Explanation:

Using the contribution margin concept,

Break-even even = fixed costs / contribution margin per unit

For Mia Enterprises

Selling price $90

Variable cost $40

Fixed costs : $75,000

Contribution margin per unit= selling price - variable expenses

contribution margins = $90-$40 = $50

Break-even point = $75,000/ 50

=1500 units

B). If sales unit was increased to $100

the new marginal cost will be $100 - $40= 60

Break-even point will be $75,000/$60

=1,250 units