Compute the break-even point in units and in revenues

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Reference no: EM13949740

The income statement for Fellows, Inc., is as follows:

Changes in Break-

Sales

$650,000

Even Points with

Less: Variable expenses

  240,000

Changes in Unit

Contribution margin

$ 410,000

Prices

Less: Fixed expenses

  295,200

LO1, LO2

Operating income

$ 114,800

Fellows produces and sells a single product. The income statement is based on sales of 100,000 units.

Required

1. Compute the break-even point in units and in revenues.

2. Suppose that the selling price increases by 10 percent. Will the break-even point increase or decrease? Recompute it.

3. Ignoring the price increase in Requirement 2, suppose that the variable cost per unit increases by $0.35. Will the break-even point increase or decrease? Recompute it.

4. Can you predict whether the break-even point increases or decreases if both the selling price and the unit variable cost increase? Recompute the break-even point incorporating both of the changes in Requirements 2 and 3.

5. Assume that total fixed costs increase by $50,000. (Assume no other changes from the original data.) Will the break-even point increase or decrease? Recompute it.

Reference no: EM13949740

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