Because of an accident Royce was involved in, his insurance company has increased his annual premium for auto insurance by 5.2%.
His original policy was set up using the premiums listed below. What is his new annual premium after the increase in the accident?
a. $514.76
b. $543.00
c. $548.20
d. $571.24
a. $514.76
b. $543.00
c. $548.20
d. $571.24
2 answers:
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Answer:
- 1200 BEPunits
- $14,400 BEP dollars
- second scenario
- 1200 BEPunits
- $14,400 BEP dollars
Explanation:
contribution margin = Sales - Variable Cost
12 - 10 = 2 contribution margin
fixed expenses = 2,400
BEP = 2,400/2 = 1,200 units
<u>Resuming: </u>each unit contributes with $2 dollars therefore it needs to sale 1,200 untis to pay the fixed cost.
units x sales price = sales revenue
1,200 x 12 = 14,400 BEP in Dollars
Also it is posible to get this by using contribution margin ratio
in the BEP formula:
contribution margin/sales price = 2/12 = 1/6
fixed cost /contribution margin ratio = 2,400/(1/6) = 14,400
Scenario were fixed cost increase:
increase in fixed/contribution margin + previous BEP = BEPunits
increase in fixed/contribution margin ratio + previous BEP = BEPdollars
600 fixed cost /contribution margin = 600/2 = 300 more units to our prevous 1,200 total of 1,500
600 fixed cost /contribution margin ratio = 600/(1/6) = $3,600 more sales revenue to our prevous 14,400 total of 18,000