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Homework Answers
Break even point = Fixed cost/Contribution margin per unit
Current break even point = 150,000/(4.50-1.50)
= 150,000/3 = 50,000 units
.
New variable cost = 1.50+20% increase = 1.80
New fixed cost = 150,000-5% decrease = 142,500
New break even point = 142,500/(4.50-1.80)
= 142,500/2.70 = 52,778 units
.
So, these changes increased Breakeven point by 2,778 units (52,778 - 50,000)
Option C is the answer
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