Question
I need help understanding how to answer this question. A firm make and sells surfboard using revolutionary manufacturing processes and materials. The firm sells its
I need help understanding how to answer this question.
A firm make and sells surfboard using revolutionary manufacturing processes and materials. The firm sells its surfboard for $110 to its distributiors. The surfboards require $30 of foam and fiberglass and 1.0 direct labor hours and annual fixed cost of $475000. The firm compensates its manufacturing employees at the rate of $25 per. The firm also applies variable manufacturing overhead at the rate of 60% of direct labor dollars. If the firm increases the quality of its direct materials, it will experince of following new production cost:
- $45 direct materials
- 80% of the original lablor hours
- $50,000 more fixed cost
- Applies overhead rate of 50% of the direct labor dollars
What is the percentage change in sales dollars required to break even if the firm changes to the higher quality materials?
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