Answer:
1. 2,500 units
2. $40,000
3. Revised Unit Sales - 2,650 units & Revised dollar sales - $42,400
Explanation:
Break even Point : The break even point is that point in which the firm has no profit or no loss or we can say that total revenue is equal to total expenditure.
1. Computation of break-even point in unit sales:
Break even point in unit sales = Fixed cost ÷ (Sales per unit - variable cost per unit)
= $10,000 ÷ ($16 - $12)
= 2,500 units
where, contribution = Sales per unit - variable cost per unit
Thus, the break-even point in unit sales is 2,500 units.
2. Calculation of break-even point in dollar sales :
The formula is shown below:
= Fixed cost ÷ Profit volume ratio
where, Profit volume ratio = (Contribution ÷ Sales) × 100
= ($4 ÷ $16) × 100
= 25%
So, Break even point in dollar sales = $10,000 ÷ 25%
= $40,000
Thus, the Break even point in dollar sales is $40,000
3. Calculation of new break-even point in unit sales is shown below:
Revised Fixed cost = $10,000 +$600 = $10,600
And, contribution is same.
So, new break-even point in unit sales = Fixed cost ÷ Contribution per unit
= $10,600 ÷ $4
= 2,650 units
Thus, new break-even point in unit sales is 2,650 units.
By applying the formula, the calculation of new break-even point in dollar sales is shown below:
New break-even point (BEP) in dollar sales = Fixed cost ÷ Profit volume ratio
Since, the Profit volume ratio remains same.
So, break-even point (BEP) in dollar sales = $10600 ÷ 25%
= $42,400
Hence, New break-even point (BEP) in dollar sales is $42,400
