If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?
Answer
30,000 units
8,710 units
12,273 units
20,000 units
(300000-30000)/(31-22)
= 30000 units
If fixed costs are $300,000, the unit selling price is $31, and the unit variable costs are $22, what is the break-even sales (units) if fixed costs are reduced by $30,000?
To calculate the break-even sales (units) after the fixed costs are reduced by $30,000, we need to use the following formula:
Break-even sales (units) = (Fixed costs - Reduction in fixed costs) / (Unit selling price - Unit variable costs)
Given:
Fixed costs = $300,000
Unit selling price = $31
Unit variable costs = $22
Reduction in fixed costs = $30,000
Plugging in the values into the formula:
Break-even sales (units) = ($300,000 - $30,000) / ($31 - $22)
= $270,000 / $9
= 30,000 units
Therefore, the break-even sales (units) after the fixed costs are reduced by $30,000 is 30,000 units.
To calculate the break-even sales (units), we need to find the point where the total revenue equals the total cost, resulting in zero profit or loss.
Let's first calculate the contribution margin per unit, which is the selling price minus the variable cost per unit:
Contribution margin per unit = Selling price - Variable cost per unit
= $31 - $22
= $9
Next, let's calculate the new fixed costs after the reduction:
New fixed costs = Old fixed costs - Reduction in fixed costs
= $300,000 - $30,000
= $270,000
Now, we can calculate the break-even sales (units) using the following formula:
Break-even sales (units) = New fixed costs / Contribution margin per unit
= $270,000 / $9
= 30,000 units
Therefore, the break-even sales (units) after the fixed costs reduction of $30,000 is 30,000 units.
The correct answer is: 30,000 units.