Baldwin has negotiated a new labor contract for the next round that will affect the cost for their product Bill. Labor costs will go from $1.79 to $2.29 per unit. In addition, their material costs have fallen from $6.82 to $5.82. Assume all period costs as reported on Baldwin's Income Statement remain the same. If Baldwin were to pass on half the new costs of labor and half the savings in materials to customers by adjusting the price of their product, how many units of product Bill would need to be sold next round to break even on the product?
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Answer:
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Answer: Assume $17 for the original selling price and $7,200 for set expenses.
$16.75 is the revised selling price ($17 plus $0.25 less $0.50).
updated variable expense
Specific Amount (in dollars)
Labor Price 2.41
material costs 5.82
Cost varies 8.23
Break-Even Level
($16.75 - $8.23) Fixed Cost 7,200 divided by Contribution Per Unit Break-Even Point $8.52 845 pieces.
Explanation: The total of all employee wages, employee perks, and payroll taxes paid by a company constitutes the expense of labor. Direct and secondary (overhead) labor expenses are separated. While indirect costs are related to support labor, such as workers who keep manufacturing machinery, direct costs include wages for the employees who create a product, including those on an assembly line.
Direct (production-related) and indirect (non-production-related) labor cost groups are the two major subcategories of labor costs.
While indirect costs are related to support labor, such as workers who keep manufacturing machinery, direct costs include wages for the employees who create a product, including those on an assembly line.
If If labor costs are not correctly allocated or assessed, the price of products or services may vary from their actual cost, eroding profits.
Learn more about actual cost from here;
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