In: Accounting
Houston-based Advanced Electronics manufactures audio speakers
for desktop computers. The following data relate to the period just
ended when the company produced and sold 44,000 speaker
sets:
Sales | $ | 3,696,000 | |
Variable costs | 924,000 | ||
Fixed costs | 2,250,000 | ||
Management is considering relocating its manufacturing facilities
to northern Mexico to reduce costs. Variable costs are expected to
average $18.00 per set; annual fixed costs are anticipated to be
$1,988,000. (In the following requirements, ignore income
taxes.)
Required:
1. Calculate the company’s current income and
determine the level of dollar sales needed to double that figure,
assuming that manufacturing operations remain in the United
States.
2. Determine the break-even point in speaker sets
if operations are shifted to Mexico.
3. Assume that management desires to achieve the
Mexican break-even point; however, operations will remain in the
United States.
a. If variable costs remain constant, by how much must fixed costs
change?
b. If fixed costs remain constant, by how much must unit variable
cost change?
4. Determine the impact (increase, decrease, or no
effect) of the following operating changes.
Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. (Do not round intermediate calculations and round your final answers to nearest whole dollar.)
|
Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.
a. If variable costs remain constant, by how much must fixed costs change? (Round your intermediate unit calculations to the nearest whole number and round your final answer to the nearest whole dollar.)
b. If fixed costs remain constant, by how much must unit variable cost change? (Round your intermediate unit calculations to the nearest whole number and round your final answer to 2 decimal places.)
Show less
|