break-even sales

currently, the unit selling price of a product is \$1,000, the unit variable cost is \$600, and the total fixed costs are \$21,600,000. a proposal is being evaluated to increase the unit selling price to \$1,200.

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

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

Question

break-even sales

currently, the unit selling price of a product is \$1,000, the unit variable cost is \$600, and the total fixed costs are \$21,600,000. a proposal is being evaluated to increase the unit selling price to \$1,200.

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

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

Accepted Answer

{ "quality": "clear", "question_count": 2, "skills_matched": [ "step_cot", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [ "Break-Even Analysis", "Unit Contribution Margin" ], "new_concepts": [], "current_concepts": [ "Break-Even Analysis", "Unit Contribution Margin", "Fixed Cost", "Variable Cost" ] } ## Calculate current break-even sales in units $$ \begin{aligned} \text{Unit Contribution Margin} &= \text{Selling Price} - \text{Unit Variable Cost} \ &= \$1,000 - \$600 = \$400 \ \text{Break-Even Sales (units)} &= \frac{\text{Total Fixed Costs}}{\text{Unit Contribution Margin}} \ &= \frac{\$21,600,000}{\$400} = 54,000 \text{ units} \end{aligned} $$ ## Calculate anticipated break-even sales in units $$ \begin{aligned} \text{New Unit Contribution Margin} &= \text{New Selling Price} - \text{Unit Variable Cost} \ &= \$1,200 - \$600 = \$600 \ \text{Anticipated Break-Even Sales (units)} &= \frac{\text{Total Fixed Costs}}{\text{New Unit Contribution Margin}} \ &= \frac{\$21,600,000}{\$600} = 36,000 \text{ units} \end{aligned} $$ ## Question 1 Currently, the unit selling price of a product is $1,000, the unit variable cost is $600, and the total fixed costs are $21,600,000. A proposal is being evaluated to increase the unit selling price to $1,200. a. Compute the current break-even sales (units). 54,000 units ## Question 2 b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. 36,000 units { "subject": "Business", "question_type": "Multi-part", "knowledge_point": [ "Business", "Accounting", "Break-Even Analysis" ] }

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Question

Explanation:

Calculate current break-even sales in units

Calculate anticipated break-even sales in units

Answer:

Question 1

Question 2