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Flying Cloud Co. has the following operating data for its manufacturing operations: Unit selling price $202 Unit variable cost $108 Total fixed costs $837,000 The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 4%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be

Respuesta :

Answer:

10,463 units

Explanation:

Unit selling price $202

Unit variable cost $108  + 10% (due to wage increase) = $118.80

Total fixed costs $837,000 + 4% (due to wage increase) = $870,480

current break even point = fixed costs / contribution margin = $837,000 / $94 = 8,904.26 ≈ 8,905 units

new break even point = fixed costs / contribution margin = $870,480 / $83.20 = 10,462.5 ≈ 10,463 units