Q4TI - Horngren'S Financial And Managerial Accounting

Question

A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has \(6,000 in fixed costs per month. Calculate the breakeven point in units under each independent scenario. 

14. Variable costs increase by \)10 per unit. 

15. Fixed costs decrease by $600. 

16. Sales price increases by 10%.

Step-by-Step Solution

Answer

 14.120 Units

15. 90 Units

16. 86 Units

Calculation of breakeven point in units if variable costs increase by $10 per unit

Required sales in units = Fixed costs + Target profit/ Contribution margin per unit 

=$6,000+$0/($100-$50)

=120 units

Calculation of breakeven point in units if fixed costs decrease by $600

Required sales in units = New Fixed costs + Target profit/ Contribution margin per unit 

=($6,000-$600)+$0/($100-$40)

=$5,400/$60

=90 units

Calculation of breakeven point in units if sales price increase by 10%

New Sales Price = Existing Price (1+Increase in sales Price)

=$100(1+0.1)

=$110

 

Required sales in units = Fixed costs / Contribution margin per unit 

=$6,000/($110-$40)

= 86 Units