Makita Company manufactures a fast-bonding glue in its Northwest plant. The comp
ID: 2357299 • Letter: M
Question
Makita Company manufactures a fast-bonding glue in its Northwest plant. The company normally produces and sells 48,000 gallons of the glue each month. This glue, which is known as MJ-7, is used in the wood industry to manufacture plywood. The selling price of MJ-7 is $36 per gallon, variable costs are $20 per gallon, fixed manufacturing overhead costs in the plant total $221,000 per month, and the fixed selling costs total $320,000 per month.
Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Makita Company
Strikes in the mills that purchase the bulk of the MJ-7 glue have caused Makita Company
Explanation / Answer
Cont pu = SP - VC = 36-20 = 16 pu Befor strike, Total Cont pm = 48000*$16 = $768,000 Less FC (221,000+320,000) ------------------------------ Net Income bef strike pm $227,000 So If Plant is closed for 2m, Net Income will decrease 2*$227,000 = $454,000 ..Ans (a)
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