The Manager at the Yarn Factory Changed the Price of Spools

question 113

Multiple Choice

The manager at the Yarn Factory changed the price of spools to increase sales.The current price per unit is $13.85 per box of 500 spools;and,the forecasted lower price per unit to increase sales is $9.95 per box of 500 spools.If the variable expenses remain at $9.14 and the fixed expenses remain $3,400 how many units must be sold at the new price to breakeven?
Compute the contribution margin per unit using the old sales price.Next,compute the contribution margin per unit using the new sales price.Use the new unit contribution margin to compute breakeven sales in units.What is the breakeven sales in units?

• A)4,198 units
• B)4,272 units
• C)4,340 units
• D)4,440 units

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Definitions:

Factory Overhead

All indirect costs associated with manufacturing, including utilities, rent, and salaries for managers.

Direct Materials

Basic substances that can be directly linked and attributed to the creation of particular products or services.

Direct Labor

The work of factory employees that can be directly associated with converting raw materials into finished goods.

Total Manufacturing Costs

The aggregate expenses involved in the manufacture of products, including direct materials, direct labor, and manufacturing overhead.