a financial analyst studying two new distribution syatem basic and delux the bas

Question

a financial analyst studying two new distribution syatem basic and delux the basic system has unit level shipping cost of $8 per unit and annual facility cost of $500,000 in contrast the delux system has unit level shipping cost of $ 4 per unit and annual facility cost of $ 780,000 the delux system promise greater customer service the compny sells its product for $ 30 per unit less a 5 percent sales commission

please answer all

A   which of the two system will be more profiable if the sales are expected to average 50,000 units per year

B at what unit volum level will mangement be indifferent as to the profit for the basic system and delux syatem

company value thepromised greater customer services ifit sales delux system ? how can the company verfiy this level of value

Explanation / Answer

A   which of the two system will be more profiable if the sales are expected to average 50,000 units per year

Profit on basic system = (28.50-8)*50000 - 500,000 = $525000

Profit on Delux system = (28.50-4)*50000 - 780,000 = $445000

B at what unit volum level will mangement be indifferent as to the profit for the basic system and delux syatem

Indifference unit point = (780000-500000)/(8-4) = 70,000 unit

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.