Question

Brooklyn sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 33,900, a selling price of $24, variable cost per unit of $12, and total fixed costs of $385,000. If Brooklyn's unit sales are 200 units less than anticipated, its break-even point will:
Group of answer choices:
A. not change.
B. decrease by $12 per unit sold.
C. increase by $12 per unit sold.
D. increase by $12 per unit sold.
E. decrease by $12 per unit sold.

Answer 1

Answer:

A. not change.

Explanation:

The formula to compute the break-even point in units is shown below:

= (Total Fixed cost) ÷ (Contribution margin per unit)

where,  

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

= $24 - $12

= $12 per unit

So, the break-even in units  would be

= $385,000 ÷ $12 per unit

= 32,083 units

If the unit sales are 200 units less, the break-even point would be  

= $385,000 ÷ $12 per unit

= 32,083 units

In both the case, the break-even point in units would remain the same. It has no impact on the unit sales