Compute the breakeven point in dollar sales for both a plan

Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2

This year Bertrand Company sold 36,000 units of its only product for $16.20 per unit. Manufacturing and selling the product required $121,000 of fixed manufacturing costs and $181,000 of fixed selling and administrative costs. Its per unit variable costs follow.

Material $4.10   
Direct labor (paid on the basis of completed units)  3.10   
Variable overhead costs  0.41   
Variable selling and administrative costs  0.21

Next year the company will use new material, which will reduce material costs by 70% and direct labor costs by 30% and will not affect product quality or marketability. Management is considering an increase in the unit sales price to reduce the number of units sold because the factory’s output is nearing its annual output capacity of 41,000 units. Two plans are being considered. Under plan 1, the company will keep the price at the current level and sell the same volume as last year. This plan will increase income because of the reduced costs from using the new material. Under plan 2, the company will increase price by 30%. This plan will decrease unit sales volume by 15%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.

Solution

This year Bertrand Company sold 36,000 units of its only product for $16.20 per unit. Manufacturing and selling the product required $121,000 of fixed manufacturing costs and $181,000 of fixed selling and administrative costs. Its per unit variable costs follow.

Material $4.10   
Direct labor (paid on the basis of completed units)  3.10   
Variable overhead costs  0.41   

formula for this:

    Contribution margin = sales price - variable costs

    Break-even point = fixed costs ÷ contribution margin

Per Unit Selling Price = 16.20
Per Unit Variable Cost = 4.10+3.10+0.41+0.21=7.82
Per Unit Contribution margin: 16.20-7.82 =8.38

fixed costs:121,000+181,000=302,000

Break-even point at sales= fixed costs ÷ contribution margin

                        = 302,000/8.38

                       =36038.18615

next year also chenge material costs by 70% and direct labor costs by 30%

            Find this way compute the break-even point in dollar sales.

    and after change the company will increase price by 30%. This plan will decrease unit sales volume by 15%

                 Find this way compute the break-even point in dollar sales.