Boss Enterprises currently sells its products for $40 per unit

Accounting Mar 02, 2021

Boss Enterprises currently sells its products for $40 per unit. Management is contemplating a 40% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change next year. Fixed expenses are $120,000 per year.

What is the breakeven point in units at the current selling price?

A) 5,000 units

B) 2,143 units

C) 24 units

D) 7,500 units

Expert Solution

Answer: A

Explanation: A)

Sales price per unit $40.00

Variable costs 16.00 ($40.00 × 40 % of sales)

Contribution Margin 24.00

Fixed costs $120,000

Breakeven units 5,000 (120,000 / $24.00 CM)

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