A process plant making 5000 kg/day of a product selling for $1.75/kg has annual variable pro- duction costs of $2 million at 100 percent capacity and fixed costs of $700,000. What is the fixed cost per kilogram at the breakeven point? If the selling price of the product is increased by 10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is 35 percent of gross earnings?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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6-16 A process plant making 5000 kg/day of a product selling for $1.75/kg has annual variable pro-
duction costs of $2 million at 100 percent capacity and fixed costs of $700,000. What is the
fixed cost per kilogram at the breakeven point? If the selling price of the product is increased
by 10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is
35 percent of gross earnings?
Transcribed Image Text:6-16 A process plant making 5000 kg/day of a product selling for $1.75/kg has annual variable pro- duction costs of $2 million at 100 percent capacity and fixed costs of $700,000. What is the fixed cost per kilogram at the breakeven point? If the selling price of the product is increased by 10 percent, what is the dollar increase in net profit at full capacity if the income tax rate is 35 percent of gross earnings?
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