Flying Cloud Co. has the following operating data for its manufacturing operations: Unit selling price $236...
Flying Cloud Co. has the following operating data for its manufacturing operations:
| Unit selling price | $236 |
| Unit variable cost | $105 |
| Total fixed costs | $799,000 |
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 next break-even point for Flying Cloud Co. will be
a.increased by 637 units
b.increased by 797 units
c.decreased by 797 units
d.increased by 956 units
Homework Answers
Current Breakeven point = Fixed cost/Contribution margin per unit
= 799,000/(236-105) = 6099 units
Proposed breakeven point
= (799,000+4%) /[(236 - (105*110%)]
= 830,960/120.50
= 6896 units.
Break-even point increased by 797 units (6896 - 6099)
Option B is the answer
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3. Construct a cost-volume-profit chart assuming maximum sales
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