Olden Company has provided the following information for this month: Sales Price $50 per unit Variable COGS $13 per unit Fixed COGS $11,000 per month Variable Selling and Administration $2 per unit Fixed Selling and Administration $3,000 per month If market pressure forces Olden to cut its sales price from $50 to $35, what is the new break-even in units?

700 units

Explanation:

The breakeven point is also known as the BEP. The BEP  is the number of units a company must sell for sales or revenue generated is equal to the cost incurred. As such, the BEP is the number of units that must be sold for the company to make neither a profit nor a loss.

Both sales and variable cost are dependent on the number of units sold.

The sales less the variable cost gives the contribution margin. The contribution margin less the fixed cost gives the net operating income.

Let the BEP units be T

35T = 11,000 + 3000 + T(13 + 2)

35T - 15T = 14,0000

20T = 14,000

T = 700

The company's new breakeven in units is 700 units

cognitive overload: having a lot on your mind impairs decision-making and tends to result in the simplest, but not necessarily best, option being selected.

empathy gaps: overlooking how you might feel in a different situation can result in unnecessary purchases, such as overbuying when shopping for food on an empty stomach.

optimism and overconfidence: wearing rose-tinted glasses and having unrealistic expectations about the future can affect money management and leave you unprepared for a change in circumstance.

instant gratification: seeking instant gratification drives impulsive spending and can undermine long-term planning and savings.

harmful habits: automatic or mindless behaviour can amplify a poor financial decision as it becomes a recurring event.

social norms: we are heavily influenced by the actions of others; while this can be in certain circumstances, it also contributes to the pressure to keep up with the joneses through conspicuous consumption.