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Gall Manufacturing sells a product for $50 per unit. The fixed costs are $840,000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $200,000 and variable costs will be 50% of the selling price. The new break-even point in units is:

Respuesta :

Shahzaibfaraz

Answer:

The new break even point in units is 41600 units.

Explanation:

The break even point in units is the number of units that provide enough revenue to meet total costs and there is no profit and no loss as the total revenue equals total cost. The break even point in units is calculated as follows,

Break even in units = Fixed costs / Contribution margin per unit

Where,

Contribution margin per unit = Selling price per unit - Variable cost per unit

The, new total fixed costs will be,

New fixed cost = 840000 + 200000  =  $1040000

The new contribution margin per unit = 50 - (50 * 0.5)  =  $25 per unit

The new break even in units = 1040000 / 25  =  41600 units

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