Question
WSR company is evaluating its performance on a product. WSR recently sold 70,000 units, generating sales revenue of $4,900,000. WSR's variable cost per unit and
WSR company is evaluating its performance on a product. WSR recently sold 70,000 units, generating sales revenue of $4,900,000. WSR's variable cost per unit and total fixed cost amounted to $20 and $2,800,000, respectively. Management is in the process of studying the dollar impact of various transactions and events, and desires answers to the followingindependentcases:
Case no. 1:Management wants to lower the firm's break-even point to 52,000 units.
Requirement 1: If all other costs remain constant, what must happen to fixed costs to achieve this objective?
Case no. 2:The company anticipates a $2 hike in the variable cost per unit.
Requirement 2:If all other costs remain constant and management desires to maintain the firm's current break-even point, what must happen to WSR's selling price? If selling price remains constant, what must happen to the firm's total fixed costs?
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