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1 March, 03:49

Reynold's grocery has fixed costs of $251,000, the unit selling price is $22, and the unit variable costs are $21. what is the break-even sales (units) if the variable costs are decreased by $5?

a. 251,000 units

b. 11,952 units

c. 15,688 units

d. 41,833 units

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  1. 1 March, 03:55
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    Fixed costs: $251,000

    Unit selling price: $22

    Unit variable costs: $21

    Decrease in variable costs: $5

    Break-even = fixed costs/contribution margin

    Contribution margin = selling price - unit variable cost

    Break-even = $251,000 / ($22-$21)

    Break-even = $251,000

    New break-even = fixed costs/[ (selling price) - (variable cost-decrease in variable cost) ]

    New break-even = $251,000/[ ($22) - ($21-$5) ]

    New break-even = $251,000/$22-$16)

    New break-even = $251,000/$6

    New break-even = $43,833 units
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