Question

If a company increases its selling price by $2 due to an increase in its variable...

If a company increases its selling price by $2 due to an increase in its variable labor cost of $2 per unit, the break even point in units will:

Increase

change but direction cannot be determined

decrease

not change

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer: Not Change

If a company increases its selling price by $2 due to an increase in its variable labor cost of $2 per unit, the break-even point in units will not change because of contribution margin per unit does not change.

Break-even point in units = Fixed cost / contribution margin per unit

Suppose Selling price is $100 and variable cost including material, labor & Mfg. overhead is $60 and fixed cost $100,000 then

Break-even point in units equals to $100,000/($100-$60) i.e 2,500 units

and after an increase in selling price and variable labor cost by $2 then break even point would be $100,000/($102-$62) i.e. 2,500 units

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Multiple choice: If a company increases its selling price by $2 per unit due to an...
Multiple choice: If a company increases its selling price by $2 per unit due to an increase in its variable labor cost of $2 per unit, the break-even point in units will: decrease increase not change change but direction cannot be determined.
A company increased the selling price for its product from $1.00 to $1.10 a unit when...
A company increased the selling price for its product from $1.00 to $1.10 a unit when total fixed expenses increased from $400,000 to $480,000 and the variable expense per unit remained unchanged at $0.50. How would these changes affect the break-even point in units? The break-even point in units would increase. The break-even point in units would decrease. The break-even point in units would remain unchanged. The effect cannot be determined from the information given.
Sormac Corporation manufactures and sells hand radios.  Price and cost data are as follows: Selling price per...
Sormac Corporation manufactures and sells hand radios.  Price and cost data are as follows: Selling price per unit $30.00 Variable cost per unit     Direct material $9.80     Direct labor $4.80     Manufacturing overhead $7.20     Selling expenses $1.90             Total Variable Cost per Unit $23.70 Annual fixed cost     Manufacturing overhead $96,800     Selling and administrative $42,400 Total Fixed Cost     $139,200 Forecasted annual sales volume (168,000 units) What is Sormac Corporation break-even point in units? What is the company’s break-even point in sales dollars? How many units...
1) Selling price per unit Is $60, variable cost per unit is $30 and fixed cost...
1) Selling price per unit Is $60, variable cost per unit is $30 and fixed cost per unit is $20. When this company operates above the break-even point, the sale of one more unit will increase net incomes by $10 a) True b) False 2) A company with sales of $100,000, the variable cost of $70,000 and fixed cost of $50,000 will reach its break-even point if sales are increased by $20,000 a) True b) False
If the selling price per unit increases, the break-even point in units will a.decrease. b.increase. c.remain...
If the selling price per unit increases, the break-even point in units will a.decrease. b.increase. c.remain the same. d.remain the same; however, contribution per unit will decrease.
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50 Direct labor...................................................................................................................... $6.00 Artist's royalties.............................................................................................................. $5.00 Manufacturing overhead.......................................................................................... $3.50 Selling expenses............................................................................................................ $2.50 Total variable costs per unit............................................................ $22.50 Annual fixed costs: Manufacturing overhead.......................................................................................... $192,000 Selling and administrative....................................................................................... $276,000 Total fixed costs................................................................................ $468,000 Forecasted annual sales volume (120,000 units)......................... $3,240,000 Management estimates that direct-labor costs will increase by 8% next year. How many units will the company have to sell next year to reach its...
Wardley Corporation sells its product for $40. The variable costs are $18 per unit. Fixed costs...
Wardley Corporation sells its product for $40. The variable costs are $18 per unit. Fixed costs are $16,000. The company is considering the purchase of an automated machine that will result in a $2 reduction in unit variable costs and an increase of $5,000 in fixed costs. Which of the following is true about the break-even point in units?         It will increase.         It cannot be determined from the information provided.         It will remain unchanged....
Momento Camera Company is considering introducing a new video camera. Its selling price is projected to...
Momento Camera Company is considering introducing a new video camera. Its selling price is projected to be $ 1 comma 100 per unit. Variable manufacturing costs are estimated to be $ 550 per unit. Variable selling costs are 5 % of sales dollars. The company expects the annual fixed manufacturing costs for the new camera to be $ 3 comma 465 comma 000. Requirements ?(a) Compute Momento?'s contribution margin per unit and contribution margin ratio. ?(b) Determine the number of...
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price...
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price $173 Variable manufacuting costs 81 Variable selling and administrative costs 24 In 2017, total fixed costs were $743,000. In 2018, there are only two expected changes. Direct material costs are expected to decrease by $5 per unit, and fixed selling and administrative costs are expected to decrease by $15,000. What must unit sales be in order for X Company to break even in 2018?
10) In 2017, X Company had the following selling price and per-unit variable cost information: Selling...
10) In 2017, X Company had the following selling price and per-unit variable cost information: Selling price $188 Variable manufacuting costs 97 Variable selling and administrative costs 30 In 2017, total fixed costs were $632,000. In 2018, there are only two expected changes. Direct material costs are expected to decrease by $6 per unit, and fixed selling and administrative costs are expected to increase by $20,000. What must unit sales be in order for X Company to break even in...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT