Phoenix based CompTronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:
Sales:$4,032,000
Variable costs:1,008,000
Fixed costs:2,736,000
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs.
Variable costs are expected to average $21.60 per set; annual fixed costs are anticipated to be $2,380,800.
(In the following requirements, ignore income taxes.)
a. Determine the effect of an increase in direct material costs on the break even point.
b. Determine the effect of an increase in fixed administrative costs on the unit contribution margin.
c. Determine the effect of an increase in the unit contribution margin on net income.
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