Eaton tool company has fixed costs of 200000 sells its

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Reference no: EM13391168

Eaton Tool Company has fixed costs of $200,000, sells its units for $56, and has variable costs of $31 per unit.

a. Compute the break-even point.

b. Eaton comes up with a new plan to cut fixed costs to $150,000. However, more labor will now be required, which will increase variable costs per unit to $34. The sales price will remain at $56. What is the new break-even point?

c. Under the new plan, what is likely to happen to profitability at very high volume levels (compared to the old plan)?

Reference no: EM13391168

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