s pt X Company spent $5,1 could be manufactured more efficiently 100 on an engin
ID: 2509825 • Letter: S
Question
s pt X Company spent $5,1 could be manufactured more efficiently 100 on an engineering atudy that revealed that Product A c of $o.80 per unit and additional fixed costs of $3,680. Current variable at a price of new process would result in variable cost savings costs per unit are 3.97, and current fixed costs are $11.48. At what $11,850. Last year, X Company sold 3,300 units of Product A t unit sales level would X Company be indifferent between adopting the new proce-and not MIoptingit? AO 1,355 EO 1,604 ?? 2,117 DO 2,646 E03308 Questions 2 and 3 refer to the following informations FO4Explanation / Answer
Current variable costs = 3.97
Current fixed costs = 11,850
Selling price = 11.48
Current contribution margin = 11.48 - 3.97 = 7.51
New variable costs = 3.97 - 0.89 = 3.08
New fixed costs = 11,850 + 3,680 = 15,530
New contribution margin = 11.48 - 3.08 = 8.4
At the level of sales the company be indifferent between adopting the new process, the profit from both the alternatives will be the same
Current contribution margin - Current fixed costs = New contribution margin - New fixed costs
(7.51*sales) - 11,850 = (8.4*sales) - 15,530
0.89 sales = 3,680
Sales = 4,135
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