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Q4TI

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1105

Short Answer

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%.

14.120 Units

15. 90 Units

16. 86 Units

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Step by Step Solution

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

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