QUESTION 8 Western Sport manufactures footballs. The company has a ball that sel

Question

QUESTION 8 Western Sport manufactures footballs. The company has a ball that sells for $18. At present, the ball is manufactured in a small plant that relies heavily on direct labor workers. Thus, variable expenses are high, totaling $8 per ball Total fixed costs are $213,000. Last year, the company sold 30,000 footballs. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40%, but it would cause fixed expenses to increase by $98,000. If the new plant is built, by how much would the breakeven point in units change? Represent an increase in the breakeven point as a positive number and a decrease in breakeven point as a negative number Round your final answer to the nearest integer

Explanation / Answer

Present break even point = 213000/18-8 = 21300 units

Proposed break even point = 311000/(18-4.8) = 23561 units

Break even point increase by = 23561-21300 = 2261

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