Question

Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is $ .

Answer 1

Answer:

Break-even point (dollars)= $60,000

Explanation:

Giving the following information:

Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000.

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= (40,000 + 5,000) / [(12 - 3)/12]= $60,000