Foggy Co.has the following operating data for its manufacturing operations:

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

Question

Foggy Co.has the following operating data for its manufacturing operations:

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

Quizplus · Accepted Answer

To calculate the new break-even point, we need to consider the impact of the changes in variable and fixed costs.

First, we need to calculate the current break-even point using the existing data:

Break-even point = Fixed costs / Contribution margin per unit
Contribution margin per unit = Sales price per unit - Variable cost per unit

Contribution margin per unit = $60 - $30 = $30
Fixed costs = $240,000 + $120,000 = $360,000

Break-even point = $360,000 / $30 = 12,000 units

Next, we need to calculate the new contribution margin per unit and fixed costs based on the given information:

New contribution margin per unit = $60 - ($33 x 1.1) = $25.7
New fixed costs = $360,000 x 1.04 = $374,400

Finally, we can calculate the new break-even point:

New break-even point = $374,400 / $25.7 = 14,640 units

The difference between the new and old break-even points is 14,640 - 12,000 = 2,640 units, which is an increase of 640 units. Therefore, the correct answer is B, increase by 640 units.

Foggy CoHas the Following Operating Data for Its Manufacturing Operations