that will affect the cost for their product Bit. Labor costs will
go from $7.91 to $8.41 per unit. In addition, their material costs
have fallen from $13.66 to $12.66. Assume all period costs as
reported on Baldwin's Income Statement remain the same. If Baldwin
were to pass on half the new costs of labor and half the savings in
materials to customers by adjusting the price of their product, how
many units of product Bit would need to be sold next round to break
even on the product?
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519
481
529
1,896
- Baldwin Has Negotiated A New Labor Contract For The Next Round That Will Affect The Cost For Their Product Bit Labor Co 1 (45.55 KiB) Viewed 33 times
2024 Income Statement Product Name Bit Bolt Buzz Brat Na Na Na Na Total Common Size Sales $61,233 $47.461 $48,130 $58,490 $0 $0 $0 $0 $215,313 100% Variable Costs: Direct Labor $14,269 $9,757 S9,626 $11,899 $0 $0 $0 $0 $45.550 21.2% Direct Material $23,437 $20,350 $18,417 $23,176 $0 $0 $0 $0 $85,379 39.7% Inventory Carry $0 $371 $885 $1,080 $0 $0 $0 $ $0 $2,337 1.1% Total Variable $37,707 $30,478 S28,927 $36,154 $0 $0 $0 $0 $133,266 61.9% Contribution Margin $23,526 $16,983 $19,203 $22,335 $0 $0 $0 $0 $82,047 38.1% Period Costs: Depreciation $2,911 $1,927 $2,720 $3,060 $0 0 $0 $0 $0 $10,617 4.9% R&D $858 $655 $510 $571 $0 0 $0 $0 $0 $2,595 1.2% Promotions $1,350 $1,350 $1.350 $1,350 $0 $0 $0 $0 $5,400 2.5% Sales $1,000 $1,000 $900 $900 $0 $0 $0 $0 $3,800 1.8% Admin $462 $358 $363 $441 $0 $0 $0 $0 $1,624 0.8% Total Period $6,581 $5,290 $5,843 $6,322 $0 $0 $0 $0 $24,036 11.2% Net Margin $16,946 $11,693 $13,360 $16,014 $0 $0 $0 $0 $58,012 26.9% Other $6,825 3.2% EBIT $51,187 23.8% Short Term Interest $2,354 1.1% Long Term Interest $4,706 2.2% Taxes $15,444 7.2% Definitions: Sales: Unit sales times list price. Direct Labor: Labor costs incurred to produce the product that was sold. Inventory Carry Cost: the cost to carry unsold goods in inventory. Depreciation: Calculated on straight-line 15-year depreciation of plant value. R&D Costs: R&D department expenditures for each product. Admin: Administration overhead is estimated at 1.5% of sales. Promotions: The promotion budget for each product. Sales: The sales force budget for each product. Other: Charges not included in other categories such as Fees, Write Offs, and TQM. The fees include money paid to investment bankers and brokerage firms to issue new stocks or bonds plus consulting fees your instructor might assess. Write-offs include the loss you might experience when you sell capacity or liquidate inventory as the result of eliminating a production line. If the amount appears as a negative amount, then you actually made money on the liquidation of capacity or inventory. EBIT: Earnings Before Interest and Taxes. Short Term Interest: Interest expense based on last year's current debt, including short term debt, long term notes that have become due, and emergency Profit Sharing $574 0.3% Net Profit $28,108 13.1% Variables Margins 50%