X Company spent $6,800 on an engineering study that revealed that Product A coul

Question

X Company spent $6,800 on an engineering study that revealed that Product A could be manufactured more efficiently. The new process would result in variable cost savings of $1.11 per unit and additional fixed costs of $3,360. Current variable costs per unit are 3.79, and current fixed costs are $10,770. Last year, X Company sold 3,600 units of Product A at a price of $11.70. At what unit sales level would X Company be indifferent between adopting the new process and not adopting it? Submit Answer Tries 0/3

Explanation / Answer

Increase in fixed costs =$6800 - 3360 = $3440 Saving in variable costs = $1.11 per unit New fixed costs = 10770 + 3440 = 14210 New Variable costs= 3.79 - 1.11 = 2.68 Previous year's profit = 3600*11.70 - 10770 = 31350 Units on adopting new process = (fixed cost + desired profit)/(selling price - variable cost) = (14210+31350)/(11.70-2.68) = 45560/9.02 = 5051 units At the units level of 5051, X company is indifferent between adopting the new process and not adopting it.

Related Questions

Navigate

• Browse (All)
• Browse X
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.