Question

APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs

Now consider each of the following scenarios for Kolbe Computing. 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

After some extensive market research, Kolbe 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: $18

Break-even units:______units

Scenario 2

Kolbe 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.

CM per unit: $15

Break-even units:_______ units

Scenario 3.

Kolbe will dispose of a machine in the factory. The depreciation on that equipment is $500 per month.

CM per unit: $16

Break-even units:______ units