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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 break-even point for Flynn Co. will:

A. unit selling price $250.00
B. unit variable cost $100
C. Total Fixed Cost $840,000

Respuesta :

jepessoa

Answer:

Flynn's break even point will increase by 640 units from 5,600 to 6,240 units.

Explanation:

first we have to determine the current break even point in units:

break even point in units = total fixed costs / contribution margin

  • total fixed costs = $840,000
  • contribution margin per unit = $250 - $100 = $150

break even point in units = $840,000 / $150 = 5,600 units

after the wage increases, the fixed costs will increase to $873,600

variable costs will increase to $110 per unit

break even point in units = total fixed costs / contribution margin

  • total fixed costs = $873,600
  • contribution margin per unit = $250 - $110 = $140

break even point in units = $873,600 / $140 = 6,240 units

Flynn's break even point will increase by 640 units from 5,600 to 6,240 units.

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