A product sells for $30 per unit and has variable costs of $18 per unit.?

Question

A product sells for $30 per unit and has variable costs of $18 per unit. The fixed costs are $720,000. If the variable costs per unit were to decrease to $15 per unit and fixed costs increase to $900,000, and the selling price does not change, break-even point in units would:

A)

Increase by 20,000.

B)

Equal 6,000.

C)

Increase by 6,000.

D)

Decrease by 20,000.

E)

Not change.

Answer 1

Starting break-even point is 60,000 units.

($720,000 / $12 unit contribution margin)

Hypothetical break-even point is also 60,000 units.

($900,000 / $15 unit contribution margin)

Answer E.