Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;what would be the break-even point in units if the sales price decreased by 20%?
A)5,000
B)7,500
C)20,000
D)8,571

Question

Sun Devil,Inc.
Sun Devil,Inc.is considering the introduction of a new product with the following price and cost characteristics

It expects to sell 70,000 units for the year.
Refer to Sun Devil,Inc;what would be the break-even point in units if the sales price decreased by 20%?
A)5,000 
B)7,500 
C)20,000 
D)8,571

Quizplus · Accepted Answer

To find the break-even point in units, we need to use the following formula:

Break-even point = Fixed costs / (Sales price per unit - Variable cost per unit)

We are not given the fixed costs, so we cannot solve for the exact break-even point. However, we can use the same formula to calculate the new break-even point if the sales price decreased by 20%.

Assuming that the variable cost per unit remains the same, the new sales price per unit would be $12 - 20% of $12 = $9.60.

Plugging in the numbers:

Break-even point = Fixed costs / ($9.60 - $8)

We can see that the lower the sales price, the higher the break-even point. Therefore, the answer must be greater than 70,000 units, since decreasing the sales price would increase the break-even point.

Using algebra, we can solve for the break-even point in units:

Break-even point = Fixed costs / $1.60

If we assume that the fixed costs are $13,700 (which we can find by plugging in the original sales price and break-even point), we get:

Break-even point = $13,700 / $1.60 = 8,562.5

Rounding up to the nearest whole number, the answer is D) 8,571.

Sun Devil,Inc. Sun Devil,Inc.is Considering the Introduction of a New Product with Product