Question

Baldwin’s product Bold has material costs that are rising from $6.82 to $7.82. Assume that period costs and other labor costs remain unchanged.

If Baldwin decides to absorb the cost and not pass any on to its customers in the form of raised prices how many units of product Bold would need to be sold next round to break even on the product?A. 854B. 970C. 1,019D. 1,021

Answer 1

B. 970

Step-by-step explanation:

Step 1. Given information.

When we are calculating break-even there is no question of unsold amount and hence the inventory cost will be irrelevant.

Let 'B' be the break-even quantity.

Step 2. Formulas needed to solve the exercise.

At breakeven,

Sales($) - Variable Cost($) - Period Cost($) = 0

Step 3. Calculation and Step 4. Solution.

or,

• 17B - (7.82+1.8)B - 7161 = 0

• B = 7161/(17 - 9.62) = 970