A product is currently made in a process-focused shop, where fixed costs are $8,000 per year...

A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $14,000 per year and variable cost = $10 per unit. If a price of $120 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

Solutions

Expert Solution

jeff jeffy answered 2 years ago

Next > < Previous

Related Solutions

A product is currently made in a process-focused shop, where fixed costs are $8,000 per year...

A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable cost = $10 per unit. If a price of $80 will allow 400...

A product is currently made by a firm to supply the market, where fixed costs are...

A product is currently made by a firm to supply the market, where fixed costs are $8,000 per month and variable cost is $50 per unit. The firm sells the product for $100 per unit. What is the break-even point in units for this operation? (5 points) At the break-even production level calculated above, what is the profit or loss? (5 points) What is the profit (or loss) if the market demand is 140 units for a certain month and...

2) A proposed project has fixed costs of $25,000 and a depreciation of $8,000 per year....

2) A proposed project has fixed costs of $25,000 and a depreciation of $8,000 per year. The variable costs are $7 per unit and sales are $9 per unit. a) What is the breakeven point in units produced? b) What is the breakeven point in dollars of revenue? c) If the operating profit at 20,000 units is $7,000. What is the degree of operating leverage? d) If sales increase to 22,000 units, what will operating profits...

A proposed project has fixed costs of $43,000 per year. The operating cash flow at 8,000...

A proposed project has fixed costs of $43,000 per year. The operating cash flow at 8,000 units is $78,000. Required: (a) Ignoring the effect of taxes, what is the degree of operating leverage? (b) If units sold rise from 8,000 to 8,500, what will be the increase in operating cash flow? (c) What is the new degree of operating leverage?

Individual Problems 5-1 George's T-Shirt Shop produces 8,000 custom-printed T-shirts per month. George's fixed costs are...

Individual Problems 5-1 George's T-Shirt Shop produces 8,000 custom-printed T-shirts per month. George's fixed costs are $24,000 per month. The marginal cost per T-shirt is a constant $9. George's break-even price is _______ per shirt. Suppose George sells 50% more T-shirts per month. At this quantity of shirts, George's break-even price is _______ per shirt. Individual Problems 5-2 Suppose an initial investment of $80 will return $30/year for three years (assume the $30 is received each year at the end...

A company produces a product that currently costs $8 in variable costs and $2 in fixed...

A company produces a product that currently costs $8 in variable costs and $2 in fixed costs. It sells the product for $14. If processed further, the company will spend an additional $6 in variable costs and $2 in fixed costs. Each unit would then be sold for $24. Why would the company choose to process further?

A company produces a product that currently costs $8 in variable costs and $2 in fixed...

XYZ, Inc. produces a product that will sell this year for $200 per unit. Fixed costs...

XYZ, Inc. produces a product that will sell this year for $200 per unit. Fixed costs are expected to total $10,000 this year and remain constant for the following four years. Variable costs are expected to be $75 per unit this year and increase at a rate of 5% in each of the following four years. XYZ, Inc. expects to sell 2,000 units this year and in each of the following four years. To earn an equivalent uniform annual gross...

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B...

Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. The crossover point between process A and process B is 50 units. Suppose the forcast demand for next year is 100 units, according to question 1) , process B will be better. True or False?

6. If a product costs $50 per unit, the fixed costs are $1000,000 and the revenue...

6. If a product costs $50 per unit, the fixed costs are $1000,000 and the revenue is $65 per unit, how many units the company should sell to achieve a profit return of 20% over the initial investment of $2.5 million? Show your calculations. (2 points)

Subjects