Question

Radison Enterprises sells a product for $45 per unit. The variable cost is $21 per unit, while fixed costs are $138,240.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $51 per unit.

units a. Break-even point in sales units b. Break-even point if the selling price were increased to $51 per unit no price were increased to si per unit unter units

Answer 1

Break even point in sales units:

=Total fixed costs/contribution per unit

Contribution per unit =selling price - variable cost per unit

a)contribution per unit =$45 -$21=$24

Break even point in sales unit =$138240/$24=5760 units

b)Break even point in sales units if selling price increased to $51

Contribution per unit =$51-$21=$30

Break even point in sales units =$138240/$30=4608 units

Answer 2

SOLUTION :

a.

Contribution margin per unit (UCM) = SP - UVC = 45 - 21 = 24 ($)

BEP ( sales units) = FC / UCM = 138240 / 24 = 5760 sales units (ANSWER)

b.

If SP = $51 :

Contribution margin per unit (UCM) = SP - UVC = 51 - 21 = 30 ($)

BEP (sales units) = FC / UCM = 138240 / 30 = 4608 sales units (ANSWER)