Asked by vaneeva perez on May 18, 2024
Verified
Payton Industries has fixed costs of $490,000, the unit selling price is $35, and the unit variable costs are $20. What are the break-even sales (units) if fixed costs are reduced by $40,000?
A) 32,667 units
B) 14,000 units
C) 30,000 units
D) 24,500 units
Break-even Sales
The amount of revenue that a business must generate to cover its fixed and variable costs before starting to realize a profit.
Fixed Costs
Expenses that do not change with the level of goods or services produced by the business, such as rent, salaries, and insurance premiums.
- Compute the equilibrium positions in units and financial terms, factoring in various cost and pricing scenarios.
- Analyze the effects of changes in fixed costs, variable costs, and selling price on break-even points.
Verified Answer
NH
natasha hendlerMay 22, 2024
Final Answer :
C
Explanation :
To calculate the break-even sales (units), we can use the formula:
Break-even units = Fixed costs / (Selling price per unit - Variable costs per unit)
Using the original values:
Break-even units = $490,000 / ($35 - $20) = 32,667 units
To find the break-even sales (units) with the reduced fixed costs of $450,000:
Break-even units = $450,000 / ($35 - $20) = 30,000 units
Therefore, the answer is C, 30,000 units.
Break-even units = Fixed costs / (Selling price per unit - Variable costs per unit)
Using the original values:
Break-even units = $490,000 / ($35 - $20) = 32,667 units
To find the break-even sales (units) with the reduced fixed costs of $450,000:
Break-even units = $450,000 / ($35 - $20) = 30,000 units
Therefore, the answer is C, 30,000 units.
Learning Objectives
- Compute the equilibrium positions in units and financial terms, factoring in various cost and pricing scenarios.
- Analyze the effects of changes in fixed costs, variable costs, and selling price on break-even points.