ararsahussen2014
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ABC Company sells a certain product line at an established price of Br 42 per unit The variable cost per unit is Br 36. The fixed cost for the year amounts to Br 540,000 Next year the selling price is to be increased to Br 45perunit. How many units had to be sold at the old established price each year in order to Breakeven

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90,000 units of the product has to be sold each year in other to break even.

The old established price = 42 per unit :

The break even unit is the number of units sold such that the net profit = 0

(expenses - income) = 0

The expenses = (Fixed cost + variable cost)

Fixed cost = 540000

Fixed cost = 540000Variable cost per unit = 36

Let the number of units required to break even = x

Expenses = income or revenue

(540000 + 36x) = 42x

540000 + 36x = 42x

540000 = 42x - 36x

540000 = 6x

x = 540000 / 6

x = 90000

Hence, 90,000 units has to be sold at the old established price in other to break even.

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