C & A Tool, a producer of machine tools wants to move to a larger site. Two alte
ID: 442202 • Letter: C
Question
C & A Tool, a producer of machine tools wants to move to a larger site. Two alternative locations have been identified: Atlas and McNally. Atlas would have fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced. McNally would have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished items sell for $29,000 each. A). At what volume of output would the two locations have the same profit. b). For what range of output would Atlas be superior (have higher profits)? c). For what range would McNally be superior? d). What is the relevance of break-even points for these cities? C & A Tool, a producer of machine tools wants to move to a larger site. Two alternative locations have been identified: Atlas and McNally. Atlas would have fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced. McNally would have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished items sell for $29,000 each. A). At what volume of output would the two locations have the same profit. b). For what range of output would Atlas be superior (have higher profits)? c). For what range would McNally be superior? d). What is the relevance of break-even points for these cities? C & A Tool, a producer of machine tools wants to move to a larger site. Two alternative locations have been identified: Atlas and McNally. Atlas would have fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced. McNally would have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished items sell for $29,000 each. A). At what volume of output would the two locations have the same profit. b). For what range of output would Atlas be superior (have higher profits)? c). For what range would McNally be superior? d). What is the relevance of break-even points for these cities? C & A Tool, a producer of machine tools wants to move to a larger site. Two alternative locations have been identified: Atlas and McNally. Atlas would have fixed costs of $800,000 per year and variable costs of $14,000 per standard unit produced. McNally would have annual fixed costs of $920,000 and variable costs of $13,000 per standard unit. The finished items sell for $29,000 each. A). At what volume of output would the two locations have the same profit. b). For what range of output would Atlas be superior (have higher profits)? c). For what range would McNally be superior? d). What is the relevance of break-even points for these cities?Explanation / Answer
Answer:- A
Let's suppose we take interval of 20 units of sales from starting 80 units.
Now we see, that at 120 units od sales both the location earn same profit.
Answer: B
The location Highest profit will be at unit 119, because at unit 120 both the profit is same, but before 120 units Location-Atlas will have more outbut in profits
Answer: C
After Units 120, the Location-Mcnally will be superior to Atlas location
Answer: D
Break even point Unit = Fixed cost / (selling price per unit - variable price per unit)
Location- Atlas = $800,000 / ($29000 - $14000)
= 53.33 units
Location- Mcnally = $920,000 / ($29000 - $13000)
= 57.5 units
Break even point in $ = Break-even point in Unit * Selling price per unit
Locatio atlas = 53.33 units * $29000 = $ 1546666.67
Location- mcnally = 57.5 units * $29000 = $ 1667500
Particular Location- Atlas Location-Mcnally Location- Atlas Location-Mcnally Location- Atlas Location-Mcnally Location- Atlas Location-Mcnally sales unit 80 units 80 units 100 units 100 units 120 units 120 units 140 units 140 units Sales price $29,000 $29,000 $29,000 $29,000 $29,000 $29,000 $29,000 $29,000 Sales $2,320,000 $2,320,000 $2,900,000 $2,900,000 3480000 3480000 4060000 4060000 less:- variable per unit price $14,000 $13,000 $14,000 $13,000 $14,000 $13,000 $14,000 $13,000 variable cost $1,120,000 $1,040,000 $1,400,000 $1,300,000 1680000 1560000 1960000 1820000 Contibution:- $1,200,000 $1,280,000 $1,500,000 $1,600,000 1800000 $1,920,000 $2,100,000 $2,240,000 less :- fixed cost $800,000 $920,000 $800,000 $920,000 $800,000 $920,000 $800,000 $920,000 Profit $400,000 $120,000 $700,000 $680,000 $1,000,000 $1,000,000 $1,300,000 $1,320,000Related Questions
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