Question

Radison Enterprises sells a product for $108 per unit. The variable cost is $56 per unit, while fixed costs are $1,297,920.

Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $116 per unit.

a. Break-even point in sales units	units
b. Break-even point if the selling price were increased to $116 per unit	units

Answer 1

a.	Break-even point in units	=	24,960	units
b.	Break-even point in units	=	21,632	units
	Workings:
a.	Unit selling Price	=	$               108
	Unit variable cost	=	$                 56
	Unit contribution margin	=	$                 52
	Break-even point in units	=	Fixed costs / Unit contribution margin
		=	$1297920 / $52
		=	24,960
b.	Unit selling Price	=	$               116
	Unit variable cost	=	$                 56
	Unit contribution margin	=	$                 60
	Break-even point in units	=	Fixed costs / Unit contribution margin
		=	$1297920 / $60
		=	21,632

Answer 2

SOLUTION :

a.

Contribution margin per unit (UCM) = SP - UVC = 108 - 56 = 52 ($)

BEP (units) = FC / UCM = 1297920 / 52 = 24960 units (ANSWER)

b.

If SP = $116 :

Contribution margin per unit (UCM) = SP - UVC = 116 - 56 = 60 ($)

BEP (units) = FC / UCM = 1297920 / 60 = 21632 units (ANSWER)