rt B: The company CEO is confident that the price reduction cited to increase to
ID: 342696 • Letter: R
Question
rt B: The company CEO is confident that the price reduction cited to increase to 950 units per day has p able to serve the larger firms in the automotive supply chain giv that in mind, she has asked Sheila to consider an even cost to purchase and install the high capacity press would rise to $360,000. However, with the more in ftem c will cause consumer demand as Sales has predicted. She has speculated that the company might be en the press' higher capacity. With larger - and more expensive - machine. 1 t machine, material and labor costs would fall to $2.25 per unit. The anticipated sales price would remain at $4.45 per unit. e. What is the breakeven point for this new press in units and in dollars? (Calculations ane sufficient.) f. In comparis on with Part c, at what volume of demand should management choose the high pacity press? At what volume should they choose the press in Part c? Calculate the point of indifference given Part c and Part e, and describe it in words. (Requires calculations and a written response.) Given the analyses done in Parts a through f, should the CEO call for the new press to be purchased and order the price reduction? Explain your rationale. g. You are on the right track ifthe break-even point in units for Part e is 163636Explanation / Answer
e. Break even units= Fixed cost/ selling price-variable cost
In this, fixed cost is= $360,000
selling price is= $4.45
and variable cost= $2.25
BEP units= 360,000/4.45-2.25= 360,000/2.20= 163636.36 units
BEP in price= BEP units * unit sale price
= 163,363*$4.45= $728,818
f. if the sales is equals or above 163,636 units, it is better to go with the new machine, i.e. high capacity press. but if the demand is less than this number, it is not better to go with this option.
g. we do not know the explanation in C, so I can not answer this without C. Please provide it in comment box and come to you sooner
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