Question

This year Burchard Company s 35,000 units of its only product for $16.00 per unit. Manufacturing and selling the product required $120,000 of fixed manufacturing costs and $180,000 of fixed se ng and administrative costs. Its per unit variable costs follow. Materiel 4.00 Direct labor (paid on the basis of completed units) 3.00 Variable overheed costs. 0.40 Variable sel ng and administrative costs 0.20 Next year the company will use new material, which will reduce material costs by 60% and direct labor costs by 40% and will not effect product quality or morketebility. Management is considering an increase in the unit soles price to reduce the number of units sold because the factory's output is nearing its annual output copacity of 40,000 units. Two plans are being considered. Under plan 1. the company will keep the price at the current level and sell the same volume os last year. This plan will increase income because of the reduced costs from using the new material. Under plan 2, the company will increase price by 25%. This plan will decrease unit sel by 10%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same. 9.09 points Required 1. Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. (Round "per unit answers" and "CM ratio" percentage answer to 2 decimal places.) per unit. Plan 1 Plan 2 Sales Variable Costs: Material Direct labor Variable overhead costs Variable S&A costs Total variable costs 0.00 0.00 Contribution margin Plan 1 ontribution mar n ratio Choose Numerator: choose Denominator: Contribution margin ratio Contribution margin ratio Contribution margin per unit Sales per unit reak-even oint in dollars Choose Numerator Choose Denominator Break-even point in dollars Contribution margin ratio Total fixed costs Break-even point in dollars Plan 2 ontribution mar n ratio Contribution margin ratio reak-even nt in dollars Break-even point in dollars

Answer 1

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