Solve: Breakeven Sales Dollar Level Change
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Question: Martin Corporation currently sells 180,000 units per year at a price of $7.00 per unit; its variable cost is $4.20 per unit; and fixed costs are $400,000. Martin is considering expanding into two additional states, which would increase its fixed costs to $650,000 and would increase its variable unit costs to an average of $4.48 per unit. If Martin expands, it expects to sell 270,000 units at $7.00 per unit. By how much will Martin's breakeven sales dollar level change?
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Solution Summary
This solution provides a concise, step by step response illustrating how to solve for the change in the breakeven sales dollar level. Two equations are required.
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Initially, break even units = fixed costs /(Price - variable cost)
= 400,000 / (7 - 4.2) = 142,857 ...
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