Answer:
Instructions are below.
Explanation:
Giving the following information:
Freese Inc. sells a product for 650 per unit. The variable cost is 455 per unit, while fixed costs are 4,290,000.
A) To calculate the break-even point both in units and dollars, we need to use the following formulas:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 4,290,000/ (650 - 455)
Break-even point in units= 22,000 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 4,290,000/ (195/650)
Break-even point (dollars)= $14,300,000
B) Now for a selling price of $655:
Break-even point in units= fixed costs/ contribution margin per unit
Break-even point in units= 4,290,000/ (655 - 455)
Break-even point in units= 21,450 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 4,290,000/ (200/655)
Break-even point (dollars)= $14,049,750
