Answer:
a. $20,000
b. i. Higher
c. ii. Lower
Explanation:
a. We know that the break even in units formula equals to
= (Fixed cost) ÷ (Selling price per unit - variable cost per unit)
= ($300,000) ÷ ($23 - $8)
= $300,000 ÷ 15
= $20,000
And, Contribution margin per unit = Selling price per unit - variable cost per unit
So, we use contribution margin per unit also.
b. Now if we assume that the fixed cost would be $400,000
So, the new break even equal to
= (Fixed cost) ÷ (Selling price per unit - variable cost per unit)
= ($400,000) ÷ ($23 - $8)
= $400,000 ÷ 15
= $26,666.67
So it is higher
c. Now if we assume that the new variable cost would be $5
So, the new break even equal to
= (Fixed cost) ÷ (Selling price per unit - variable cost per unit)
= ($300,000) ÷ ($23 - $5)
= $300,000 ÷ 18
= $16,666.67
So it is lower
