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Romashka [77]
2 years ago
12

A small business company is considering updating the current production line. There are two plans. For plan A, the fixed cost wi

ll be $40,000 and the variable cost will be $27 per unit after the update. For plan B, the fixed costs will be $54,000 and the variable cost will be $26 per unit after the update. Please answer the following questions: (a) Suppose the selling price is $35, what is the break-even volume for each plan
Business
1 answer:
ICE Princess25 [194]2 years ago
3 0

Answer:

Results are below.

Explanation:

Giving the following information:

Plan A:

Fixed costs= $40,000

Unitary varaible cost= $27

Plan B:

Fixed costs= $54,000

Unitary varaible cost= $26

Selling price per unit= $35

<u>To calculate the break-even point in units, we need to use the following formula:</u>

Break-even point in units= fixed costs/ contribution margin per unit

<u>Plan A:</u>

Break-even point in units= 40,000 / (35 - 27)

Break-even point in units= 5,000

<u>Plan B:</u>

Break-even point in units= 54,000 / (35 - 26)

Break-even point in units= 6,000

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