Answer:
The company will need fewer units to break even.
Explanation:
Giving the following information:
Total fixed expenses $51,000
Selling price per unit $45
Variable expenses per unit $25
New fixed costs= 51,000 - 12,120= 38,880
First, we need to calculate the actual break-even point. After that, determine the effect of the reduction on fixed costs.
Break-even point= fixed costs/ contribution margin
Break-even point= 51,000 / (45 - 25)
Break-even point= 2,550 units
Now, with fixed costs= 38,880
Break-even point= 38,880 / (45 - 25)= 1,944
The company will need fewer units to break even.
