Question

A product sells for $30 per unit and has variable costs of $16.00 per unit. The fixed costs are $952,000. If the variable costs per unit were to decrease to $15.40 per unit, fixed costs increase to $992,800, and the selling price does not change, break-even point in units would:

Answer 1

If the variable costs per unit were to decrease to $15.40 per unit, fixed costs increase to $992,800, and the selling price does not change, break-even point in units would: 68,093.2 Units

Solution:

The point of divergence is the manufacturing stage where production costs are equal to commodity sales. Investment is supposed to achieve a breakthrough if the market price of an asset is identical to its original cost.

New Break-even Point

= New Fixed Cost/(Selling Price - New Variable Cost)

=  $\frac{(992,800)}{30 - 15.40}$

= $\frac{(992,800)}{14.58}$

= 68,093.2 Units