 Business
27 August, 12:06

# Grosheim Incorporated has fixed expenses of \$211,500 per year. Right now, Grosheim Incorporated is selling its products for \$100 per unit. Management is contemplating a 20% increase in the selling price for the next year. Variable costs are currently 40% of sales revenue and are not expected to change in dollar amount on a per unit basis next year (the company will pay the same amount for variable costs next year). If fixed costs increase 10% next year, and the new selling price per unit goes into effect, how many units will need to be sold to breakeven?

+3
1. 27 August, 12:16
0
Breakeven in units is 3231

Explanation:

Breakeven units=fixed costs/contribution margin per unit.

new selling price=\$100 * (1+20%) = \$120

variable cost per unit=\$120*40%=\$48

contribution margin=selling price per unit-variable cost per unit

contribution margin per unit=\$120-\$48=\$72

fixed costs next year=\$211,500 * (1+10%) = \$232,650.00

breakeven units=\$232,650.00/\$72=3231