Freese Inc. sells a product for 650 per unit. The variable cost is 455 per unit, while fixed costs are 4,290,000. Determine (a) the break-even point in sales units and (b) the break-even point if the selling price were increased to $655 per unit. a. Break-even point in sales units units b. Break-even point if the selling price were increased to $655 per unit units

Instructions are below.

Explanation:

Giving the following information:

Freese Inc. sells a product for 650 per unit. The variable cost is 455 per unit, while fixed costs are 4,290,000.

A) To calculate the break-even point both in units and dollars, we need to use the following formulas:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 4,290,000/ (650 - 455)

Break-even point in units= 22,000 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 4,290,000/ (195/650)

Break-even point (dollars)= $14,300,000

B) Now for a selling price of $655:

Break-even point in units= fixed costs/ contribution margin per unit

Break-even point in units= 4,290,000/ (655 - 455)

Break-even point in units= 21,450 units

Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 4,290,000/ (200/655)

Break-even point (dollars)= $14,049,750

Selling price = $650

Variable costs = $455

Contribution margin = $195

Fixed costs $4,290,000

A. Break even point = Fixed costs divided by contribution

= 4,290,000/195

= 22,000 units

Break even point sales =BEP units x selling price

= 22,000 x $650

= $14,300,000

B.

Selling price = $655

Variable costs = $455

Contribution margin = $200

Fixed costs $4,290,000

Break even point = Fixed costs divided by contribution

= 4,290,000/200

= 21,450 units

Break even point sales =BEP units x selling price

= 21,450 x $655

= $14,049,750

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