Question

Marchete Company produces a single product. They have recently received the results of a market survey that indicates that they can increase the retail price of their product by 10% without losing customers or market share. All other costs will remain unchanged. Their most recent CVP analysis is presented below. Current Units sold 980 Sales Price per Unit Variable Cost per Unit Contribution Margin per Unit $140 $98 $42 Fixed Costs $35,868 Break-Even (in units) 854 Break-Even (in dollars) $119,560 Sales Variable Costs Contribution Margin Fixed Costs Net Income (loss) $137,200 $96,040 $41,160 $35,868 $5,292 If they enact the 10% price increase, what will be their new break-even point in units and dollars? If required, round final answers to nearest whole number. New Price Break-even (in units) 35,966 Break-even (in dollars) $ 131,516 X

Answer 1

BEP sales units = Fixed Cost / Contribution margin per unit Revised selling price per unit Variable cost per unit Contribution margin per unit Fixed Cost Break-even point in unit sales $154 ($140 x 110%] $98 [Not changed] $56 ($154 - $98] $35,868 641 [$35868 / 56] Breakeven sales in dollars = Fixed costs / Contribution margin ratio Contribution Margin Ratio = Contribution margin per unit / Selling price per unit Contribution margin per unit Revised selling price per unit Contribution Margin Ratio Fixed costs Breakeven sales in dollars $56 [As calculated above) $154 0.36364 ($56 / $154] $35,868 $98,637 [$35868 / 0.36364]