Question

Knoll, Inc. currently sells 72,000 units a month for $126 each, has variable costs of $96 per unit, and fixed costs of $162,000. Knoll is considering increasing the price of its units to $136 per unit. If the price is changed, how many units will Knoll need to sell for profit to remain the same as before the price change?

Answer 1

Answer:

Break-even point in units= 54,000 units

Explanation:

Giving the following information:

Knoll, Inc. currently sells 72,000 units a month for $126 each, has variable costs of $96 per unit, and fixed costs of $162,000. Knoll is considering increasing the price of its units to $136 per unit.

First, we need to calculate the current income:

Sales= 72,000*126= 9,072,000

Variable cost= 72,000*96= (6,912,000)

Contribution margin= 2,160,000

Fixed costs= (162,000)

Net operating income= 2,000,000

Now, we need to use the break-even point in units incorporating the desired profit of $2,000,000:

Break-even point in units= (fixed costs + desired profit)/ contribution margin per unit

Break-even point in units= (162,000 + 2,000,000) / (136 - 96)

Break-even point in units= 54,000 units