Question

i attended our industry's showcase conference last month and learned that chester is updating their pricing strategy for their product cent early intel suggests that they'll drop the price $1.80. They'll likely continue to keep both material and labor costs consistent at $6.16 and $6.89 per unit respectively and i want us to better understand what their break even point is. How many units (000) of cent must they sell to break even ?You can expect their period costs to stay consistent with the Income Statement available in your Drive. Thanks in advance! Sincerely, Sanjay 1060 units, 1066 units, 820 units, 439 units

Answer 1

To calculate the break-even point, we need to consider fixed costs, variable costs, and selling price per unit. However, without the fixed costs or revenues, we can't determine the exact number of units Cheseter must sell to break even.

Step-by-step explanation:

To calculate the break-even point of Chester's product, we need to consider the fixed costs, variable costs, and the selling price per unit. Given that the material and labor costs per unit are consistent at $6.16 and $6.89 respectively, and the company plans to drop the price by $1.80, we can calculate the break-even point as follows:

Calculate the total variable costs per unit: $6.16 + $6.89 = $13.05

Calculate the contribution margin per unit: Selling price - Total variable costs per unit = $1.80 - $13.05 = -$11.25

Calculate the break-even point in units: Fixed costs / Contribution margin per unit = $0 (since the costs and revenues are not provided)

Since we don't have the fixed costs or the revenues, it is not possible to determine the exact number of units Chester must sell to break even.

Answer 2

The break-even point for Chester's product Cent cannot be calculated without the total fixed costs and the new selling price. The formula for computing the break-even point is Total Fixed Costs divided by the difference between Selling Price per Unit and Variable Cost per Unit.

Step-by-step explanation:

To calculate the break-even point in units for Chester's product 'Cent,' we need to know their total fixed costs, the price at which they will sell the product, and the total variable costs per unit. Unfortunately, the income statement that would typically provide the total fixed costs and the new selling price isn't available in this scenario. However, we do know Chester's material and labor costs per unit which are $6.16 and $6.89 respectively. Without the selling price and fixed costs, we cannot compute the break-even point.

To calculate the break-even point when the necessary data is available, you would use the formula:

Break-even point in units = Total Fixed Costs / (Selling Price per Unit - Variable Cost per Unit)

We don't have the selling price after the $1.80 price drop, nor the fixed costs from Chester's income statement, which are essential to perform this calculation. If those figures were known, you'd subtract the sum of the material and labor costs from the new selling price, and then divide the total fixed costs by that number to find the break-even point in units.