Increase in Break-Even Volume from Reduced Contribution Margin

Steps:

• Calculate total fixed costs: $18.90/unit × 5000 units =$94,500.
• Original contribution margin: $75 - ($25 + $5) =$45/unit; original break-even units: $94,500 ÷$45 = 2100 units.
• New contribution margin: $60 - ($25 + $5) =$30/unit; new break-even units: $94,500 ÷$30 = 3150 units.
• Extra units needed: 3150 - 2100 = 1050.

Why B is correct:

• Break-even volume = fixed costs ÷ contribution margin per unit; the price cut lowers margin from $45 to$30, increasing required units by 1050 per the formula.

Why the others are wrong:

• A: Ignores original break-even; 810 is unrelated miscalculation.
• C: 210 is original break-even units, not the increase.
• D: 3150 is new total break-even units, not extra.

Final answer: B