math homework

Question

Annual fixed costs for a product are $75,000. The product itself sells for $6 and it costs $2 in variable costs to make each product.

By how many units will the annual break-even point for the product change if the variable cost per unit goes up to $2.50?

Answer 1

6 - 2.50 = 3.50

0 = 3.50(x) - 75,000  (new)

0 = 3.50(x) - 75,000

x = 21429

6 - 2 = 4

0 = 4x - 75,000 (old)

x = 18750

21429 - 18750 = 2679

For the new, higher variable cost of 2.50 per unit, 2674 more units must be sold to reach break even.