50 3 increasing the variable operating cost per unit

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 2) increasing the sale price per unit to $12.50, (3) increasing the variable operating cost per unit to $7.50, and (4) simultaneously implementing all three of these changes. Substituting the appropriate data into Equation 12.3 yields the following results: (1) Operating breakeven point $3,000 $10 $5 (2) Operating breakeven point $2,500 $12.50 $5 TABLE 12.3 600 units 3331⁄3 units Sensitivity of Operating Breakeven Point to Increases in Key Breakeven Variables Increase in variable Effect on operating breakeven point Fixed operating cost (FC) Increase Sale price per unit (P) Decrease Variable operating cost per unit (VC) Increase Note: Decreases in each of the variables shown would have the opposite effect from their effect on operating breakeven point. 512 PART 4 Long-Term Financial Decisions (3) Operating breakeven point $2,500 $10 $7.50 (4) Operating breakeven point $3,000 $12.50 $7.50 1,000 units 600 units Comparing the resulting operating breakeven points to the initial value of 500 units, we can see that the cost increases (actions 1 and 3) raise the breakeven point, whereas the revenue increase (action 2) low...
View Full Document

Ask a homework question - tutors are online