1-3. If you had to decide whether to continue making a component part or to begin buying the part from an overseas supplier, wha
1 answer:
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Answer:
break even point in units at the current selling price is $5000 units
Explanation:
given data
Selling price = $ 90 per unit
selling price for next year = 40% increase
Variable costs = 40% of sales revenue
Fixed expenses = $ 270,000 per year
to find out
break even point in units at the current selling price
solution
we know that Contribution margin is
Contribution margin = 1 - Variable cost ratio ..............1
Contribution margin = 1 - 0.40
Contribution margin = 0.60
so Contribution per unit will be
Contribution per unit = Selling price × Contribution margin ratio .............2
Contribution per unit = $90 × 0.60
Contribution per unit = $54 per unit
and
Break even point in units at current price will be
Break even point = ........3
Break even point =
Break even point = $5000 units
so break even point in units at the current selling price is $5000 units