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SBD Phone Company sells its waterproof phone case for $90 per unit. Fixed costs total $162,000, and variable costs are $36 per unit. How will the break-even point in units change in response to each of the following independent changes in selling price per unit, variable cost per unit, or total fixed costs

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Answer:

Instructions are below.

Explanation:

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

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

Break-even point in units= 162,000 / (90 - 36)

Break-even point in units= 3,000

The break-even point in units is the number of units required to cover for the fixed costs. At this point, the net income is zero. When cost increase, there are necessary more units to break even.

Fixed cost increase= break-even point in units increases

Unitary variable cost increase= contribution margin decreases. Break-even point in units increases

Selling price increase= break-even point in units decreases.