Baldwin has negotiated a new labor contract for the next round that will affect

Question

Baldwin has negotiated a new labor contract for the next round that will affect the cost for their product Baker. Labor costs will go from $2.87 to $3.37 per unit. In addition, their material costs have fallen from $6.80 to $5.80. 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 Baker would need to be sold next round to break even on the product? Select: 1

1,332

1,281

1,950

1,112

Explanation / Answer

Solution: 1,332 units

Working: Breakeven units = Period costs / new per unit contribution margin

Price = 16 + 0.25 - 0.5 = 15.75

CM = 15.75 - (2.87+6.80) = 6.08

8100 / 6.08 = 1,332 units

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