Eaton Tool Company has fixed costs of $232,400, sells its units for $62, and has variable costs of $34 per unit.
a. Compute the break-even point.
b. Ms. Eaton comes up with a new plan to cut fixed costs to $180,000. However, more labor will now be required, which will increase variable costs per unit to $37. The sales price will remain at $62. What is the new break-even point? Note: Round your answer to the nearest whole number.
c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?
- Profitability will be less
- Profitability will be more