the fixed costs for a frim drop by 25costs%. Prior to breakthrough fixed

were $100.000 and united contribution margin was and remains at 5.00. The new amount of break-even units will be:
is it 15,000 or 20.000 why? Thank You

To determine the new amount of break-even units, we need to understand the concept of break-even analysis.

Break-even analysis is a financial calculation used to determine the point at which total revenue equals total costs, resulting in neither profit nor loss. It helps businesses determine how many units they need to sell in order to cover their fixed costs.

Let's perform the calculation step by step:

1. Start with the original fixed costs: $100,000.
2. Calculate the contribution margin per unit: $5.00. The contribution margin represents the amount each unit sold contributes toward covering fixed costs.
3. Use the formula to calculate the break-even units: Break-even units = fixed costs / contribution margin per unit.

Now, let's calculate the break-even units before the reduction in fixed costs:

Break-even units = $100,000 / $5.00 = 20,000 units

Since the original break-even units were 20,000, we can conclude that the correct answer is 20,000 units.