Question
Assume that you are part of the accounting team for Gordon Hardware. The company currently expects to sell 618 units for total revenue of $21,000
Assume that you are part of the accounting team for Gordon Hardware. The company currently expects to sell 618 units for total revenue of $21,000 each month. Gordon Hardware estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $8,500 are also expected, which includes fixed overhead and selling and administrative costs.
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APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs
Now consider each of the following scenarios for Gordon Hardware. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately.
Scenario 1 | Scenario 2 | Scenario 3 |
Gordon has been experiencing quality problems with a materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit. | Gordon will dispose of a machine in the factory. The depreciation on that equipment is $500 per month. | After some extensive market research, Gordon has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately. |
CM per unit: $16 | CM per unit: $17 | CM per unit: $19 |
Break-even units:531 | (NEED HELP) Break-even units: | Break-even units: 447 |
I need help with scenario 2. I entered 500 but system says its wrong.
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