Current position
Selling price per unit = $209
Variable cost per unit = $102
Contribution margin per unit = Selling price per unit - Variable cost per unit
= 209-102
= $107
Fixed costs = $755,000
Break even point in units = Fixed costs/Contribution margin per unit
= 755,000/107
= 7,056 units
New Position
Selling price per unit = $209
Increase in variable costs = 10%
New variable cost = Old variable cost x 110%
= 102 x 110%
= $112.20
Contribution margin per unit = Selling price per unit -New variable cost
= 209-112.20
= $96.80
Increase in fixed cost = 4%
New fixed costs = Old fixed cost x 104%
= 755,000 x 104%
= $785,200
Break even sales in units = New fixed costs /Contribution margin per unit
= 785,200/96.80
= 8,111 units
Increase in break even point = New break even point - Old break even point
= 8,111-7,056
= 1,055 units
If sales price are held constant, the next break even point for Flying Cloud co. will increase by 1,055 units.
Correct option is b.
Kindly comment if you need further assistance. Thanks‼!
Flying Cloud Co. has the following operating data for its manufacturing operations: Unit selling price $209...
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