Argentina Partners is concerned about the possible effects of inflation on its operations.

Argentina Partners is concerned about the possible effects of inflation on its operations. Presently, the company sells 60,000 units for $30 per unit. The variable production costs are $15, and fixed costs amount to $700,000. Production engineers have advised management that they expect unit labor costs to rise by 15% and unit materials costs to rise by 10% in the coming year. Of the $15 variable costs, 50% are from labor and 25% are from materials. Variable overhead costs are expected to increase by 20%. Sales prices cannot increase more than 10 percent. It is also expected that fixed costs will rise by 5 percent as a result of increased taxes and other miscellaneous fixed charges.

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