Proposal A Proposal B Proposal C
Selling Price $99 $129 $99
Variable Costs 55 55 49
Contribution Margin Ratio
Fixed Costs $110,000 $110,000 $110,000
Break-even in Units
Break Even in Dollars
1. What are the break-even points in units and dollars under proposal A?
2. How did the increased selling price under proposal B impact the break-even points in units and dollars compared to the break-even points calculated under proposal A?
3. Why did the change in variable cost under proposal C not impact the break-even points in units and dollars as significantly as proposal B did?
The problem deals with determining the different profits associated with production volume. It also deals with determining the break-even level with selected information.