Currently, the unit selling price of a product is $110, the unit variable cost is $80, and the total fixed costs are $345,000. A proposal is being evaluated to increase the unit selling price to $120.

Question

a. Compute the current break-even sales (units).
units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.
units

Answer 1

a) unit margin =110-80 = 30
Fixed cost =345000
Break-even = 345000/30 = 11500 units

b) new break-even = 345000/40 = 8625 units