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Assume that you are part of the accounting team for Strunk Computing. The company currently expects to sell 618 units for total revenue of $21,000 each month. Strunk Computing estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $8,500 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below.

Strunk Computing
Contribution Margin Income Statement
Sales		$
		$
Operating income		$

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

Now consider each of the following scenarios for Strunk 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	Scenario 2	Scenario 3
Strunk 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.	Strunk will dispose of a machine in the factory. The depreciation on that equipment is $500 per month.	After some extensive market research, Strunk 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: $	CM per unit: $	CM per unit: $
Break-even units: units	Break-even units: units	Break-even units: units

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