Question
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
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?
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Horngrens Financial and Managerial Accounting
Authors: Tracie L. Nobles, Brenda L. Mattison, Ella Mae Matsumura
5th edition
9780133851281, 013385129x, 9780134077321, 133866297, 133851281, 9780133851298, 134077326, 978-0133866292
