Your company specializes in manufacturing oversized spa-type bathtubs for the residential market.You have long been a proponent of using a modified breakeven analysis.You think that this approach is essential to your company's success because you operate in the luxury-item marketplace.
Required:
Which of the following situations is the result of a trend that would prompt you to use a modified breakeven analysis rather than the traditional model?
A)You find that consumer demand is affected by environmentalists' cautions about water usage.
B)You find that the price of advertising has been affected by the move to online publishing.
C)Your employees are due for a significant salary and benefits increase to match those offered by your competitors.
D)The landlord of your manufacturing facility has announced a sizeable rent increase to cover earthquake readiness.
E)You have had an increase in the cost of raw materials, which are based on petroleum-derived products.

Question

Your company specializes in manufacturing oversized spa-type bathtubs for the residential market.You have long been a proponent of using a modified breakeven analysis.You think that this approach is essential to your company's success because you operate in the luxury-item marketplace. ​
​Required:
Which of the following situations is the result of a trend that would prompt you to use a modified breakeven analysis rather than the traditional model?
A)​You find that consumer demand is affected by environmentalists' cautions about water usage.
B)​You find that the price of advertising has been affected by the move to online publishing.
C)​Your employees are due for a significant salary and benefits increase to match those offered by your competitors.
D)​The landlord of your manufacturing facility has announced a sizeable rent increase to cover earthquake readiness.
E)​You have had an increase in the cost of raw materials, which are based on petroleum-derived products.

Quizplus · Accepted Answer

The trend of environmentalists' cautions about water usage directly affects the demand for oversized spa-type bathtubs for residential use, as these tubs require a large amount of water to fill. Therefore, a modified breakeven analysis would be useful to determine the impact of changes in demand on the breakeven point and profitability. The other trends mentioned in the options - advertising costs, employee salaries and benefits, rent increase, and cost of raw materials - can be accounted for in a traditional breakeven analysis.

Your Company Specializes in Manufacturing Oversized Spa-Type Bathtubs for the Residential