Question

Radison Inc. sells a product for $55 per unit. The variable cost is $35 per unit, while fixed costs are $43,200. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $62 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $62 per unit units

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

Selling price= $55 per unit

Unitary variable cost= $35

Fixed costs= $43,200

A.

To calculate the break-even point in units, we need to use the following formula:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 43,200 / (55 - 35)

Break-even point in units= 2,160 units

B. Selling price= $62

Break-even point in units= 43,200 / (62 - 35)

Break-even point in units= 1,600 units

Answer 2

Answer:

2160 units

1600 units

Explanation:

Break-even point is the fixed cost of $43,200 divided by the contribution margin per unit.

Contribution margin per unit is the selling price per unit minus variable cost per unit.

When price is $55,contribution margin is $20 ($55-$35),hence breakeven point is shown thus:

breakeven point in sales units=$43,200/$20=2,160 units

When price is increased to $62 per unit,contribution margin is $27 ($62-$35)

Breakeven point in sales unit=$43,200/$27=1,600 units