Chester has negotiated a new labor contract for the next round that will affect the cost for their product Creak. Labor costs will go from $2.95 to $3.45 per unit. Assume all period and variable costs as reported on Chester's Income Statement remain the same.
If Chester were to pass on half the new labor costs to their customers, how many units of product Creak would need to be sold next round to break even on the product?
A. 1,452
B. 1,391
C. 1,336
D. 2,025
Product Name Creal
Sales $30,785
Variable Costs
Direct Labor $5.676
Direct Material $13,523
Inventory Carry $186
Total Variable $19,385
Contribution Margin $11,401
Period Costs
Depreciation $4.293
SG&A: R&D $1,000
Promotions $1,250
Sales $1,400
Admin $403
Total Pe riod $8,346
Net Margin $3,055
