Company manufactures product x. last year company sold 40,000 units at 180 per u

Question

Company manufactures product x. last year company sold 40,000 units at 180 per unit, total cost amount 2,400,000 of which 800,000 were considered fixed cost Company is planning to replace a component in the part at a cost of 20 with a new part cost 40. A new machine is also needed to increase the plant capacity which will cost 120,000 with useful life of 6 years and no salvage value. The company uses straight line depreciation a) Calculate the break even last year in units. b) How many units of product would the company need to sell to generate profit of 300,000 (last year) If the company holds the sale price constant and the purchase the new part and the new machine how many units the company needs to sell to generate the same profit for last year

Explanation / Answer

Requirement a: Calculation of Breakeven Units: A Total Cost 2400000 B Fixed Cost 800000 C Variable Cost (A-B) 1600000 D Sale Units 40000 E Unit Variable Cost (C/D) 40 F Selling Price 180 G Unit Contribution Margin (F-E) 140 H Breakeven Units (B/G) 5714 Requirement b: Calculation of units to be sold to generate profit of $300000: A Fixed Cost 800000 B Profit 300000 C Contribution Required (A+B) 1100000 D Unit Contribution Margin 140 E Units to be sold (C/D) 7857 Requirement c: A Unit Contribution Margin 140 B Fixed Cost Existing 800000 Part Replacement 40 Depreciation of new machine (120000/60) 2000 802040 C Profit required 300000 D Contribution Required (B+C) 1102040 E Units to be sold (D/A) 7872

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

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