Fill in the Blank QuestionFill in the blank question.Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is $.
Question
Fill in the Blank QuestionFill in the blank question.Maker's Company produces a product that has a variable cost of 40,000. The product sells for 3, but increase fixed costs by .
Solution
To calculate the revised break-even point in dollars, we first need to calculate the revised contribution margin per unit and the revised total fixed costs.
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The revised variable cost per unit is 12 per unit, the revised contribution margin per unit is 3 = $9.
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The revised total fixed costs are the original fixed costs plus the additional fixed costs from the new machine, which is 5,000 = $45,000.
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The break-even point in units is calculated by dividing the total fixed costs by the contribution margin per unit. So, the revised break-even point in units is 9 = 5,000 units.
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To find the break-even point in dollars, we multiply the break-even point in units by the selling price per unit. Therefore, the revised break-even point in dollars is 5,000 units * 60,000.
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