Answer:
New units sale= 2,063 units
Explanation:
Giving the following information:
Sam has recently found out that prices from his manufacturer will be increasing the variable cost by $40 when it used to only be $80. Sam wants to determine if he can keep the selling price the same for customers by decreasing his fixed costs by $15,000. Currently, Sam’s sales are $300,000 at $200 per unit, and his fixed costs are $95,000.
First, we need to calculate the current profit:
Sales in units= 1,500
Contribution margin= (200 - 80)*1,500= 180,000
Fixed costs= 95,000 (-)
Profit= 85,000
To calculate the units required to adapt to the new changes using the following formula:
Break-even point= (fixed costs + profit)/ contribution margin
Break-even point= (80,000 + 85,000)/ (200 - 120)
Break-even point= 2,063 units
