QUESTION 5 0.5 points Save Answer Your company plans to produce a new product, a

Question

QUESTION 5 0.5 points Save Answer Your company plans to produce a new product, a wireless computer mouse. Two machines can be used to make the mouse, Machines A and B. The price per mouse will be $25.00 regardless of whiclh machine is used. The fixed and variable costs associated with the two machines are shown below. At the expected sales level of 30,000 units, how much higher or lower will the firm's expected EBIT be if it uses Machine B with high fixed costs rather than Machine A with low fixed costs, i.e., what is EBITB EBITA? $25.00 Price per mouse (P) Fixed costs (F) Variable cost/unit (V) Exp. unit sales (Q) OA.S-102,000 0 B. $-129.600 OC.$-93,600 OD, $-118,800 OE.S-120,000 $25.00 S100,000$400,000 11.00 30,000 $17.00 30,000

Explanation / Answer

EBIT (A) = $140,000 and EBIT (B) = $20,000

EBIT (B) - EBIT (A) = $20,000 - $140,000 = - $120,000

Answer is E (- $120,000)

Machine A Machine B Price per mouse $25 $25 Fixed costs $100,000 $400,000 Variable Cost per unit $17 $11 Sales (expected) in units 30,000 30,000 Revenue ( Sales* Price per mouse) $750,000 $750,000 Cost (fixed cost+ variable cost per unit* Sales) $610,000 $730,000 EBIT ( revenue- cost) $140,000 $20,000

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