Tyrene Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $37....
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Tyrene Products manufactures recreational equipment. One of the company's products, a skateboard, sells for $37. The skateboards are manufactured at an antiquated plant that relies heavily on direct labor workers. Thus, variable costs are high, totaling $25.90 per skateboard of which 70% is direct labor cost.
Over the past year, the company sold 43,000 skateboards, with the following operating results :
Sales (43,000 skateboards) : $1,591,000
Variable Expenses : $1,113,700
Contribution Margin : $477,300
Fixed Expenses : $277,500
Net Operating Income : $199,800
The company is considering the construction of a new automated plant. The new plant would slash variable costs by 20%, but it would increase fixed costs by 60%. If the new plant is built, what would be company's new break-even point in skateboards?
A) 25,000 B) 27,273 C) 30,000 D) 43,000
I NEED DETAILED HELP WITH STEPS AND SOLUTION !! :)
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