Answer:
Old break even points= 18,000 units
New break even points= 12,857 units
Explanation:
The fixed costs are $450,000
The unit selling price is $75
The unit variable costs are $50
The unit selling price have an increase of 10 units
The first step is to calculate the contribution margin per unit
Contribution margin per unit= Selling price per unit-Variable cost per unit
= $75-$50
= $25 per unit
The old break even point can be calculated as follows
= Fixed costs/Contribution margin per unit
= $450,000/$25
= 18,000 units
Since there is an increase in the unit selling price by $10 per unit then, the contribution matgin per unit can be calculated as follows
= $25+$10
= $35
Therefore, the new break even point can be calculated as follows
= $450,000/$35
= 12,857 units
Hence the old break even point and new break even point are 18,000 units and 12,857 units respectively
