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fustrated
Mar 25, 2007, 09:11 AM
Hi
I would appreciate it if someone will check out my problem and see if I did it correctly, and if not help me out.
Thanks

The problem is:

Currently, the unit selling price is $30, the variable cost, $14, and the total fixed costs, $96,000. A proposal is being evaluated to increase the selling price to $34.

a.) compute the current break-even sales (units).

b.) Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant.

This is what I came up with, is this correct?
a.)$96,000/16 =6,000 units
b.)$34-14= $20 unit contribution margin, $96,000/$20=4800 units

CaptainForest
Mar 25, 2007, 01:29 PM
PART A
Selling 30x
VC 14x
CM 16x
Less Fixed Costs 96,000
Net Income 0

16x = 96,000
x = 96,000/16 = 6,000 units

PART B
Selling 34x
VC 14x
CM 20x
Less Fixed Costs 96,000
Net Income 0

20x = 96,000
x = 96,000/20 = 4,800 units

Conclusion
Yes, your answers are correct.