The management accountant of Caroline plc has calculated the firm’s breakeven point from the following data:
Selling price per unit: $20
Variable costs per unit: $8
Fixed overheads for next year: $79,104.
It is now expected that the product’s selling price and variable cost will increase by 8% AND 5.2 % RESPECTIVELY.
These changes will cause Caroline’s breakeven point for next year to:
A) Rise by 9.0%
B Rise by 2.8%
C) Fall by 2.8%
D) Fall by 9%
Please help to solve ,i cannot get clue here what to do with percent?
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4y ago#1The selling price will change to 20 + (8% x 20) = $21.60.
The variable cost will change to 8 + (5.2% x 8) = $8.416
So you can calculate the breakeven point using both the current contribution and the contribution next year in the normal way.
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