If fixed costs are $240,000, the unit selling price is $32, and the unit variable costs are $20, what are the old and new break-even sales (units) if the unit selling price increases by $4?

Question

If fixed costs are $240,000, the unit selling price is $32, and the unit variable costs are $20, what are the old and new break-even sales (units) if the unit selling price increases by $4?

a. 12,000 units and 15,000 units
b. 7,500 units and 6,667 units
c. 20,000 units and 30,000 units
d. 20,000 units and 15,000 units

Answer 1

Margin units = 32-20 = 12

Fixed cost = 240000
break-even = 240000/12 = 20000

Margin units = 36-20 = 16
Fixed cost = 240000
New break-even = 240000/16 = 15000

20000 units and 15000 units

Answer 2

To calculate the old and new break-even sales (units), we need to use the formula:

Break-even sales (units) = Fixed costs / (unit selling price - unit variable costs)

Old break-even sales (units):
Fixed costs = $240,000
Unit selling price = $32
Unit variable costs = $20

Old break-even sales (units) = $240,000 / ($32 - $20)
= $240,000 / $12
= 20,000 units

New unit selling price = $32 + $4 = $36

New break-even sales (units):
Fixed costs = $240,000
Unit selling price = $36
Unit variable costs = $20

New break-even sales (units) = $240,000 / ($36 - $20)
= $240,000 / $16
= 15,000 units

Therefore, the correct answer is option d. 20,000 units and 15,000 units.

Answer 3

To find the old and new break-even sales (units) when the unit selling price increases by $4, we need to use the break-even formula.

The break-even point is the point at which total revenue equals total costs, resulting in zero profit. It can be calculated using the following formula:

Break-Even Sales (units) = Fixed Costs / (Unit Selling Price - Unit Variable Costs)

Given information:
Fixed Costs = $240,000
Unit Selling Price = $32
Unit Variable Costs = $20

To find the old break-even sales, we can substitute the given values into the formula:

Old Break-Even Sales (units) = $240,000 / ($32 - $20)
Old Break-Even Sales (units) = $240,000 / $12
Old Break-Even Sales (units) = 20,000 units

Now, let's calculate the new break-even sales after the unit selling price increases by $4:

New Unit Selling Price = $32 + $4 = $36

New Break-Even Sales (units) = $240,000 / ($36 - $20)
New Break-Even Sales (units) = $240,000 / $16
New Break-Even Sales (units) = 15,000 units

Therefore, the old and new break-even sales (units) are 20,000 units and 15,000 units, respectively.

The correct answer is:
d. 20,000 units and 15,000 units