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21 December, 19:22

Grand Gimmicks Company produces a single product with a current selling price of $170. Variable costs are $130 per unit, and fixed costs per month average $6,240. Management is considering increasing the selling price to $190 per unit. Assume that the cost of the product and monthly fixed expenses will not change as a result of the proposed increase in selling price. At the proposed increased selling price of $190 per unit, what dollar volume of sales per month is required to break-even? (Rounded)

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  1. 21 December, 19:34
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    Break Even Sales Volume in Dollars = $ 19500

    Explanation:

    Break Even Sales Volume in Dollars = Fixed Costs / Contribution Margin Ratio

    Break Even Sales Volume in Dollars = Fixed Costs / 1 - (variable Costs / Sales)

    Break Even Sales Volume in Units = Fixed Costs / Contribution Margin per Unit

    Break Even Sales Volume in Dollars = Fixed Costs / 1 - (variable Costs / Sales)

    Break Even Sales Volume in Dollars = $6,240/1 - (130/190)

    Break Even Sales Volume in Dollars = $6,240/1-0.68

    Break Even Sales Volume in Dollars = $6,240/0.32

    Break Even Sales Volume in Dollars = $ 19500
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