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Angler Manufacturing makes fishing poles and sells them for $30 each. The firm’s variable costs are $12 per unit, and its total fixed costs are $54,000. This year, Angler anticipates its fixed costs will increase by 20%. What is the firm’s break-even point in units assuming the increase in fixed costs and that all other factors remain constant

Respuesta :

Answer:

3,600 units

Explanation:

Given:

Selling price per unit = $30

Variable cost per unit = $12

Contribution per unit = Selling price - variable cost

                                 = 30 - 12

                                 = $18 per unit

Fixed cost = $54,000

Increase in fixed cost this year = 54,000 × 1.2 = $64,800

Break even point in units = Fixed cost / contribution margin

Since only fixed cost increase and selling price and variable cost remain same, contribution margin will be $18 per unit

Break even point in units = 64,800 / 18

                                           = 3,600 units

fichoh

The break even point refers to the number of items that would be sold such that profit is 0. Hence, the break even in units of item sold is 3600 units.

  • Break even(units) = Fixed cost / contribution margin

Contribution margin :

  • Selling price per unit - variable cost per unit

Contribution margin = $30 - $12 = $18

Total fixed cost = (54000 + (0.2 × 54000)) = $64800

The break even in units = (64800 ÷ 18) = 5400 units

Therefore, the break even point in units is 3600 units.

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