Accounting

Breakeven Points

1.- The purchasing manager for Forster’s Fashion Bags has been able to purchase the materials for its signature handbags for $3 less per bag. If everything is kept the same, what effect would this reduction in material cost have on the breakeven point for Forster’s Fashion Bags?

2.- Now, assume that the sales manager decides to reduce the selling price of each handbag by $3. What would be the net effect of both changes be on the breakeven point in units for Forster’s Fashion Bags?

3.- Would you recommend a different approach to the purchasing manager if the results are not favorable to the organization? Please explain.