Question

For the past year, Hornbostel Company had fixed costs of $6,552,000, a unit variable cost of $444, and a unit selling price of $600. For the coming year, no changes are expected in revenues and costs, except that a new wage contract will increase variable costs by $6 per unit. Determine the break-even sales (units) for the following:
a. Past year units
b. Coming year units

Answer 1

Past year units
6552000/(600-444) = 42000 units
Coming year units
655200/ (600-450) = 43680 units

Answer 2

Currently, the unit selling price is $50, the variable cost, $34, and the total fixed costs, $106,000. A proposal is being evaluated to increase the selling price to $54.