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Eaton Tool Company has fixed costs of $210,600, sells its units for $58, and has variable costs of $32 per unit. a. Compute the break-even point. b. Ms. Eaton comes up with a new plan to cut fixed costs to $160,000. However, more labor will now be required, which will increase variable costs per unit to $35. The sales price will remain at $58. What is the new break-even point?

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Answer:

A)Break-even point=  8100 units

B) Break-even point= 6957 units

Explanation:

Giving the following information:

Fixed costs of $210,600

Price per unit= $58

Variable costs of $32 per unit.

A)Break-even point= fixed costs/contribution margin= 210600/(58-32)= 8100 units

B) Fixed cost= 160000

Unitary variable cost= $35

Break-even point= 160000/(58-35)= 6957 units

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