Question

5. (5 pts) Between 200K and 400K units/yr, fixed costs are $200K/yr and variable costs are $5.80/unit. If production volume goes up above 400K units/yr, new, more automated equipment must be installed which will increase the fixed cost to $550K/yr but the adding of more automation allows variable costs to be reduced to $5.65/unit. If the volume increases above 600K units/yr, a new facility must be built, and fixed costs will increase to $700K while the variable costs decrease to $5/unit. If the selling price of the unit is $7, what is the breakeven point?

Answer 1

In the present question there are 3 Production range
1.) Between 200k and 400k units/year
	Selling Price		$7.00	Per Unit
	Variable Cost		$5.80	Per Unit
	Contribution Margin		$1.20	Per Unit
	Fixed Cost		$200,000.00
	Break Even		Fixed Cost
			Contribution Margin per unit
			$200,000.00
			$1.20
			166666.6667
ANSWER		i.e.	166666		UNITS
2.) Between 400k and 600k units/year
	Selling Price		$7.00	Per Unit
	Variable Cost		$5.65	Per Unit
	Contribution Margin		$1.35	Per Unit
	Fixed Cost		$550,000.00
	Break Even		Fixed Cost
			Contribution Margin per unit
			$550,000.00
			$1.35
			407407.4074
ANSWER		i.e.	407407		UNITS
3.) Above 600k units/year
	Selling Price		$7.00	Per Unit
	Variable Cost		$5.00	Per Unit
	Contribution Margin		$2.00	Per Unit
	Fixed Cost		$700,000.00
	Break Even		Fixed Cost
			Contribution Margin per unit
			$700,000.00
			$2.00
			350000
ANSWER		i.e.	350000		UNITS