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A firm make and sells surfboard using revolutionary manufacturing processes and materials. The firm sells its surfboard for $110 to its distributiors. The surfboards require $30 of foam and fiberglass and 1.0 direct labor hours and annual fixed cost of $475000. The firm compensates its manufacturing employees at the rate of $25 per. The firm also applies variable manufacturing overhead at the rate of 60% of direct labor dollars.
If the firm increases the quality of its direct materials, it will experince of following new production cost:
Question 1: What is the percentage change in sales dollars required to break even if the firm changes to the higher quality materials?
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