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Break-even point

Sheridan Inc. sells a product for $46 per unit. The variable cost is $26 per unit, while fixed costs are $75,600.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $53 per unit.

a. Break-even point in sales units fill in the blank 1 of 2
units
b. Break-even point if the selling price were increased to $53 per unit fill in the blank 2 of 2
units

Answer 1

To determine the break-even point in sales units, we can use the following formula:

\[
\text{Break-even point (units)} = \frac{\text{Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Cost per Unit}}
\]

### Part (a)

Given:
- Selling Price = $46
- Variable Cost = $26
- Fixed Costs = $75,600

First, we calculate the contribution margin per unit:

\[
\text{Contribution Margin} = \text{Selling Price} - \text{Variable Cost} = 46 - 26 = 20
\]

Now we can calculate the break-even point in units:

\[
\text{Break-even point (units)} = \frac{75,600}{20} = 3,780 \text{ units}
\]

### Part (b)

Now we will calculate the break-even point if the selling price were increased to $53 per unit.

Given:
- New Selling Price = $53

Calculate the new contribution margin per unit:

\[
\text{New Contribution Margin} = 53 - 26 = 27
\]

Now, we can calculate the new break-even point in units:

\[
\text{Break-even point (units)} = \frac{75,600}{27} \approx 2,800 \text{ units}
\]

### Summary of Results

a. Break-even point in sales units: **3,780 units**

b. Break-even point if the selling price were increased to $53 per unit: **2,800 units**