Question

Angler Manufacturing makes fishing poles and sells them for $30 each. The firm’s variable costs are $12 per unit, and its total fixed costs are $54,000. This year, Angler anticipates its fixed costs will increase by 20%. What is the firm’s break-even point in units assuming the increase in fixed costs and that all other factors remain constant

Answer 1

Answer:

3,600 units

Explanation:

Given:

Selling price per unit = $30

Variable cost per unit = $12

Contribution per unit = Selling price - variable cost

                                 = 30 - 12

                                 = $18 per unit

Fixed cost = $54,000

Increase in fixed cost this year = 54,000 × 1.2 = $64,800

Break even point in units = Fixed cost / contribution margin

Since only fixed cost increase and selling price and variable cost remain same, contribution margin will be $18 per unit

Break even point in units = 64,800 / 18

                                           = 3,600 units