Answered: 1. What would be the BEP in units sales…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter3: Cost Behavior And Cost Forecasting

Section: Chapter Questions

Problem 26BEB: Using High-Low to Calculate Fixed Cost, Calculate the Variable Rate, and Construct a Cost Function...

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1. What would be the BEP in units sales if the company decides to:
Increase the sales price from $100 to $105 by spending annually $5000 for advertisement?

2. What would be the BEP in units sales if the company decides to:

Increase the sales price from $100 to $105 and cutting the fixed salary of the salespeople by $15000 and instead provides them $10 per unit commission?

3. Which one of the following options provides better units BEP for the company?

Option A:

Increase the sales price from $100 to $105 by spending annually $5000 for advertisement

OptionB:

Increase the sales price from $100 to $105 and cutting the fixed salary of the salespeople by $15000 and instead provides them $10 per unit commission.

a) option A

b) option B

c) both options are same

d) None of the options

Use the available pick lists from within the three boxed areas to change values,
noting how the break-even units change within the green-shaded area. Think
critically about why the changes in break-even units are occuring based on your
revised assumptions.
Sales price per unit
Variable costs per unit
Total fixed cost
Break-even in units
BEFORE
100
80
50,000
2,500
AFTER
100
80
50,000
2,500

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