Question

Concord Corporation sells radios for $50 per unit. The fixed costs are $665000 and the variable costs are 60% of the selling price. As a result of new automated equipment, it is anticipated that fixed costs will increase by $195000 and variable costs will be 50% of the selling price. The new break-even point in units is:
(A) 35550
(B) 34400
(C) 33250
(D) 26600

Answer 1

Answer:

(B) 34400 units

Explanation:

The formula to compute the break even point is shown below:

= (Fixed costs) ÷ (Contribution margin per unit)  

where,  

Contribution margin per unit = Selling price per unit - Variable expense per unit  

= $50 -  ($50 × 50%)

= $50 - $25

= $25

And, the fixed cost = $665,000 + $195,000 = $860,000

So, the break even point would be

= ($860,000) ÷ ($25)

= 34,400 units