35. Byrnes Company currently produces and sells 4,000 units of a product that ha

Question

35. Byrnes Company currently produces and sells 4,000 units of a product that has a contribution margin of $6 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $18,000. The company has recently invested in new technology and expects the variable cost per unit to fall to $8 per unit. The investment is expected to increase fixed costs by $15,000. Before the new investment was made, how many units had to be sold to breakeven? A. 2,500 units B. 5,500 units C. 4,000 units D. 3,000 units

Explanation / Answer

Number of units to be sold before investment to reach breakeven = Fixed cost / Contribution per unit

                                                                                             = 18000/6 i.e 3000 units

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