Answer:
$0.8
Explanation:
This is incomplete question. Lets complete the question with new and more information and answer that question.
Question to Consider:
Moe's has budgeted the following for next fiscal year:
Total Fixed Expenses ---------- 500,000
Selling Price Per Unit ----------- 45
Variable Expense Per Unit ---- 25
If Moe's can reduce fixed expenses by $20,000, by how much can variable expenses per unit increase and still allow the company to maintain the original breakeven sales in units?
Solution:
The profit per unit is:
45 - 25 = $20
To cover the fixed costs of $500,000 at $20 profit per unit, Moe's has to sell:
500,000/20 = 25,000 Units
Now, we want to keep this units same but now fixed costs are lessed by 20,000. So we fixed amount of costs are:
500,000 - 20,000 = 480,000
Now, we let the amount increase in variable cost be "x", so we can say profit would be (per unit):
45 - (25+x)
Now, to keep 25,000 units, we can solve the below equation:
[tex]\frac{480,000}{45-(25+x)}=25000[/tex]
Solving for x would give us the increase in variable cost. Lets solve for x:
[tex]\frac{480,000}{45-(25+x)}=25000\\480,000=(20-x)(25,000)\\480,000=500,000-25,000x\\25000x=20,000\\x=0.8[/tex]
So we can increase var expenses by $0.8
