A company has the following report and decided to make changes:

Direct Materials = $38,900

Fixed Manufacturing Overhead = $93,000

Total Cost with Current Material = $131,900

Material Cost Increase = 10%

New Direct Materials Cost = $38,900 + ($38,900 * 0.10)

New Direct Materials Cost = $38,900 + $3,890

New Direct Materials Cost = $42,790

Fixed Manufacturing Overhead Decrease = 5%

New Fixed Manufacturing Overhead Cost = $93,000 - ($93,000 * 0.05)

New Fixed Manufacturing Overhead Cost = $93,000 - $4,650

New Fixed Manufacturing Overhead Cost = $88,350

Total Cost New Material = New Direct Materials Cost + New Fixed Materials Overhead Cost

Total Cost New Material = $42,790 + $88,350

Total Cost New Material = $131,140

Comparing Two Scenarios:

Total Cost Current Material = $131,900

Total Cost New Material = $131,140

Difference Cost = $131,900 - $131,140 = $760

The company should change because they would save $760.

Based on this information, how many units do they have to sell to break even?

Answer rating: 100% (QA)

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