Question

Elrod Inc. sells a product for $75 per unit. The variable cost is $45 per unit, while fixed costs are $48,000. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $95 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $95 per unit units

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Elrod Inc. sells a product for $75 per unit. The variable cost is $45 per unit, while fixed costs are $48,000.

1) To calculate the break-even point in units, we need to use the following formula:

Break-even point= fixed costs/ contribution margin

Break-even point= 48,000/(75 - 45)

Break-even point= 1,600 units

2) If the selling price increases to $95, the break-even point in dollars would be:

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 48,000 / [(95 - 45)/95]= $91,200