Kent Company manufactures a product that sells for $53.00. Fixed costs are $260,000 and variable costs are $28.00 per unit. Kent can buy a new production machine that will increase fixed costs by $13,600 per year, but will decrease variable costs by $3.80 per unit. What effect would the purchase of the new machine have on Kent's break-even point in units

Break Even Point refers to the situation of no profit and no loss in the business. The company calculate the break even point to keep its a sales above the break even point in order to generate more and more profits.

In the above case, calculation of the break even point in units is as follows:-

Break even point in units = fixed cost / sales in units - variable cost in units.

= 260000 / 53 -28

= 10,400 units

Thus the actual break even point in units is 10400 units.

The possible break even point if the Kent company bought the machine is as follows -:

= ($260,000 + 13600)/ 53 - 28 - 3.80

= 273600 / 21.2

= 12,966.82 units

Thus the break even points in units increases.

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