Choice "c" is correct. The ceramics manufacturer will need to sell 19,250 cups under new cost

assumptions to break even. The fact pattern provides current breakeven information and requires

computation of a revised breakeven subject to new assumptions.

Current Costs Assumptions Revised Costs

Selling price (given) $ 7.50 $ 9.00

Variable costs (given) 2.25 x 1.333 = 3.00

Contribution margin (computed) $ 5.25 $ 6.00

Breakeven in units (given) 20,000

Fixed costs (computed) $105,000 x 1.10 = $ 115,000

Current fixed costs are computed using the breakeven formula in units as follows:

Fixed costs ÷ Contribution margin per unit = Breakeven in units

Fixed costs ÷ $5.25 = 20,000

Fixed costs = $5.25 x 20,000 = $105,000

Revised breakeven point in units is computed using the same formula with revised data:

Fixed costs ÷ Contribution margin per unit = Breakeven in units

__$115,000 ÷ $3.00 = Breakeven in units__

19,250 = Breakeven in units

Y is contibution magin taken as 3 per unit when it should be 6 ?