The following data apply to Beta Corporation for a given period: Variable costs per unit $3.50 Contribution ma...
The following data apply to Beta Corporation for a given period:
|
Variable costs per unit |
$3.50 |
|
Contribution margin per unit |
$1.50 |
|
Breakeven sales (present volume) |
$1,000,000 |
Beta wants to sell an additional 50,000 units at the same selling price. Variable costs per unit are not likely to change, but Beta may incur additional fixed costs. By how much can fixed costs increase before the additional 50,000 units of sales are not worthwhile?
Homework Answers
The offer will not become worthwhile if fixed cost increases more than contribution margin on additional 50000 units
We can calculate this by
Increase in fixed cost = contribution margin per unit × 50000
= 1.5×50000
= $ 75000
Thus the sale of additional units will not be worthwhile if fixed cost increases by $ 75000
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