Question

In: Operations Management

For a table manufacturing company, selling price for a table is $161.00 per Unit, Variable cost...

For a table manufacturing company, selling price for a table is $161.00 per Unit, Variable cost is $25.00 per Unit, rent is $3,531.00 per month and insurance is $285.00 per month. Company wants to expand its business and improve the table quality, it wants to increase the selling price for a table to $290.00 per Unit, Variable cost to $57.00 per Unit, bigger area will have rent $5,704.00 per month and insurance is $389.00 per month At what point will the company be indifferent between the current mode of operation and the new option?

Solutions

Expert Solution

Let, the quantity at indifference point = X

Then,

For current operation:

Profit = (161-25)*X - (3531 + 285)

For new operation:

Profit = (290-57)*X – (5704+389)

At indifference point,

(161-25)*X - (3531 + 285) = (290-57)*X - (5704+389)

136X – 3816 = 233X – 6093

X = (6093-3816)/(233-136)

X = 23.47 units or 23 units to make both the options to be indifferent.


Related Solutions

For a table manufacturing company, selling price for a table is $203.00 per Unit, Variable cost...
For a table manufacturing company, selling price for a table is $203.00 per Unit, Variable cost is $23.00 per Unit, rent is $4,884.00 per month and insurance is $300.00 per month. Company wants to expand its business and improve the table quality, it wants to increase the selling price for a table to $305.00 per Unit, Variable cost to $59.00 per Unit, bigger area will have rent $6,985.00 per month and insurance is $421.00 per month At what point will...
Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit...
Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit Selling expenses $5,100 plus 5% of selling price Administrative expenses $3,000 plus 20% of selling price note Note that some costs have variable components such as commissions on sales and shipping costs. The contribution margin ratio would be: A) 70%. B) 45%. C) 75%. D) 55%.
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price...
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price $172 Variable manufacuting costs 85 Variable selling and administrative costs 22 In 2017, total fixed costs were $643,000. In 2018, there are only two expected changes. Direct material costs are expected to decrease by $8 per unit, and fixed selling and administrative costs are expected to increase by $10,000. What must unit sales be in order for X Company to break even in 2018?
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per unit Variable Cost per unit Contribution Margin per unit X $1,248 $468 $780 Y 473 253 220 The sales mix for products X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y combined. Round answer to nearest whole number. units...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per unit Variable Cost per unit Contribution Margin per unit X $1,248 $468 $780 Y 473 253 220 The sales mix for products X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y combined. Round answer to nearest whole number. units
Given: the following information Variable cost per unit = $1.25 Selling price per unit = $1.00...
Given: the following information Variable cost per unit = $1.25 Selling price per unit = $1.00 Fixed Cost/Month     = $40,000 Solve for: A.) How many units per month must be produced to break-even (Q)? Given: The following information: Variable cost per unit = $1.25 Q = Breakeven quantity units per month solved in part a . Fixed Cost/Month     = $40,000 New selling price = ?? (Solve for) Solve for: B.) What should the new selling price must be in order to make...
1 If your variable cost per unit INCREASED, then your A selling price per unit would...
1 If your variable cost per unit INCREASED, then your A selling price per unit would decrease. B break-even units would decrease. C selling price per unit would increase. D break-even units would increase. 2 Which of the following explains the key difference between a traditional income statement and a contribution margin income statement? A Only the traditional income statement can correctly compute net income. B Only the contribution margin income statement can correctly compute net income. C Only the...
Given the following Selling Price: 50$ per unit Variable Cost: 40$ per unit Fixed Cost: 80,000$...
Given the following Selling Price: 50$ per unit Variable Cost: 40$ per unit Fixed Cost: 80,000$ per unit Calculate: A. Contribution margin as well as the contribution margin ratio B. Profit(loss) if 7,200 units are sold C. Margin of safety if 10,100 units are sold D. Break even point in dollars
A firm’s fixed cost $50,000 and its variable cost is $3 per unit. The selling price...
A firm’s fixed cost $50,000 and its variable cost is $3 per unit. The selling price $5 per unit. The management is considering two projects but only one would be selected. Project A will result in an increase in fixed cost, which will amount to $150,000 and a decrease in variable cost which fall to $2. Project B is less ambitious undertaking that results in fixed costs increasing to $70,000 and variable costs decreasing to $2.30 per unit. Currently 55,000...
Data Selling price per unit $50 Manufacturing costs: Variable per unit produced: Direct materials $11 Direct...
Data Selling price per unit $50 Manufacturing costs: Variable per unit produced: Direct materials $11 Direct labor $6 Variable manufacturing overhead $3 Fixed manufacturing overhead per year $120,000 Selling and administrative expenses: Variable per unit sold $4 Fixed per year $70,000 Year 1 Year 2 Units in beginning inventory 0 Units produced during the year 10,000 6,000 Units sold during the year 8,000 8,000 Enter a formula into each of the cells marked with a ? below Review Problem 1:...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT