Question

Santa Fe Production sells a single product to wholesalers. The company's budget for the upcoming year revealed anticipated unit sales of 31,600, a selling price of $20, variable cost per unit of $8, and total fixed costs of $360,000. If Santa Fe’s unit sales are 300 units more than anticipated, its break-even point will: not change. decrease by $8 per unit sold. decrease by $12 per unit sold. increase by $8 per unit sold. increase by $12 per unit sold.

Answer 1

Answer:

If Santa Fe’s unit sales are 300 units more than anticipated, its break-even point will: not change

Explanation:

Break Even Point is the Point where a firm neither makes a Profit nor a Loss.Break-Even Point is a Function of the Selling Price, Variable Costs and Fixed Costs.

Break even Point = Fixed Cost/Contribution per unit( Selling Price - Variable Costs)

If Santa Fe’s unit sales are 300 units more than anticipated,this does not affect any functions of the break even point calculation.Thus no effect on the break even point.

Answer 2

Answer: break even point will not change

Explanation:

Given the following ;

Anticipated unit sale = 31,600

Selling price = $20

Variable cost = $8

Total fixed cost = $360,000

Additional sale = 300

Break even point represent a point where total cost(both variable and fixed cost) is the same with the total revenue. At this point there is no loss in amount invested and there is no profit.

Break even point =[Total fixed cost ÷ contribution per unit]

Where contribution per unit = Selling price - variable cost

With an anticipated sale of 31,600;

Break even point = $360,000 ÷ $(20 - 8)

Break even point = $30,000

Selling more units than anticipated would not have any bearing or effect on the break even point as it is not dependent on the quantity or number of units of a particular item sold.

Here,

With sale rising by 300 above the anticipated unit, total unit sold = 31,900;

Break even point = $360,000 ÷ $(20 - 8)

Break even point = $30,000.

The break even point still remains the same.

Only when changes are made to either the variable cost, selling price or fixed cost will impact the value of the break even point.