Question

For the current year ending January 31, Ringo Company expects fixed costs of $178,500 and a unit variable cost of $41.50. For the coming year, a new wage contract will increase the unit variable cost to $45. The selling price of $50 per unit is expected to remain the same.

Answer 1

 Answer: A. 21,000  B. 35,700  

Step By Step:  

Contribution Margin per unit = $ 8.50

Break even sales (in units) = Fixed Cost / Contribution margin per unit

Break even sales (in units) = 178,500 / 8.50

Break even sales (in units) = 21,000 units

Answer to Part b)

Contribution Margin = Selling Price per unit - Variable cost per unit

Contribution Margin per unit = 50 - 45

New Contribution Margin per unit = $ 5

Break even sales (in units) = Fixed Cost / Contribution margin per unit

Break even sales (in units) = 178,500 / 5

New Break even sales (in units) = 35,700 units