Posted: 17 Apr 2009 at 16:15  IP Logged



Firstly, lets calculate the fixed costs :
We know, Break even is when total sales = total costs, i.e., fixed + variable
In the 1st year, break even was at 20,000 units.
Thus, Sales 20000 units X $7.50 p.u. = FC + VC 20,000 units X $2.25 p.u.
FC = $105,000
Second year,
new VC = 2.25 p.u. + 33.3% increase = $3.00 per unit
new FC = 105,000 + 10% increase = $115,500
Again, applying the break even formula  assume units reqd to break even in 2nd year are "y" units :
Sales y X 9 p.u. = FC 115,500 + VC y X 3.00 p.u.
Thus, y = Break even units = 19250
__________________ Divya  CO State
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Ethics  2011
