Chapter 10

Changing Costs

Our friend Bob, with whom we are getting quite well acquainted by now, is experiencing rising costs for the appliances he sells. He is wondering how this change will affect his breakeven point. Table 10.1, Refrigerator Contribution Margin, represents a typical refrigerator sale for Bob.

Table 10.1. Refrigerator Contribution Margin

Here is Bob’s breakeven point before the change in cost:

This translates into $1,250,000 sales ($1,000 per unit × 1,250 refrigerators) needed to break even.

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