Foggy Co. has the following operating data for its manufacturing operations: $\begin{array}{ll}
\$ 250 & \text { Unit selling price } \
\$ 100 & \text { Unit variable cost } \
\$ 840,000 & \text { Total fixed costs }
\end{array}$ 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 Foggy Co. will:

Question

Quizplus · Accepted Answer

The original unit variable cost is $100, and a 10% increase raises it to $110. The original fixed costs are $840,000, and a 4% increase raises them to $873,600. The contribution margin per unit changes from $150 ($250 - $100) to $140 ($250 - $110). The original break-even point is 5,600 units ($840,000 / $150), and the new break-even point is 6,240 units ($873,600 / $140), an increase of 640 units.

Foggy Co Has the Following Operating Data for Its Manufacturing Operations