question archive Patsy Smith is planning to sell her special knife for $15 per unit
Patsy Smith is planning to sell her special knife for $15 per unit
Subject:AccountingPrice: Bought3
Patsy Smith is planning to sell her special knife for $15 per unit. She purchases units from a
local distributor for $6 each. She can return any unsold units for a full refund. Fixed costs for booth rental, including lighting and security is $4500.
Required
a) Compute the breakeven point in units sold. (5 marks)
b) Suppose the unit purchased is $5 instead of $6, the fixed cost increases by $500, but
the selling price is unchanged. Compute the new breakeven point in units sold.
c) Using the above data, explain how cost behaviour affects Patsy Smith's decision making?
