2C1G BOLGER AND CO. MANUFACTURES LARGE GASKETS FOR THE TURBINE INDUST...

197.

CSO: 2C1a

LOS: 2C1g

Bolger and Co. manufactures large gaskets for the turbine industry. Bolger’s per unit

sales price and variable costs for the current year are as follows.

Sales price per unit

$300

Variable costs per unit

210

Bolger’s total fixed costs aggregate $360,000. As Bolger’s labor agreement is expiring at

the end of the year, management is concerned about the effect a new agreement will have

on its unit breakeven point. The controller performed a sensitivity analysis to ascertain

the estimated effect of a $10 per unit direct labor increase and a $10,000 reduction in

fixed costs. Based on these data, it was determined that the breakeven point would

a.

decrease by 1,000 units.

b.

decrease by 125 units.

c.

increase by 375 units.

d.

increase by 500 units.