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Santa Fe Production sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000.

If Santa Fe’s unit sales are 300 units more than anticipated, its break-even point will:


A. decrease by $12 per unit sold.

B. decrease by $8 per unit sold.

C. increase by $12 per unit sold.

D. increase by $8 per unit sold.

E. not change.

Respuesta :

Answer:

Option (E) is correct

Explanation:

Given that,

Anticipated unit sales = 31,600

Selling price = $20,

Variable cost per unit = $8,

Total fixed costs = $360,000

Break-even point:

= Total fixed costs ÷ (Selling price - Variable cost)

= $360,000 ÷ ($20 - $8)

= $360,000 ÷ $12

= 30,000 units

If Santa Fe’s unit sales are 300 units more than anticipated, then as a result the break even point remains the same because increase in the unit sales will not impact the break even point.

ayokenny2001

If Santa Fe’s unit sales are 300 units more than anticipated, its break-even point will: E not change.

Given the information below;

Total fixed costs = $360,000

Selling price = $20,

Variable cost per unit = $8,

Then,

Break-even point:

= Total fixed costs / (Selling price - Variable cost)

= $360,000 / ($20 - $8)

= $360,000 / $12

= 30,000 units.

With regards to the above, If Santa Fe’s unit sales are 300 units more than anticipated, increase in the unit sales will not impact the break even point hence it remains the same.

 

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