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Determine the effect of an increase in direct material costs

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Question - Phoenix-based CompTronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:

Sales: $4,032,000

Variable costs: 1,008,000

Fixed costs: 2,736,000

Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $21.60 per set; annual fixed costs are anticipated to be $2,380,800. (In the following requirements, ignore income taxes.)

Required - Determine the effect of an increase in direct material costs on the break-even point.

Reference no: EM131799409

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