A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. 1. The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that The Swiss Interior Company is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss? 2. The President of The Swiss Interior Company is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?
A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020.
1. The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that The Swiss Interior Company is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss?
2. The President of The Swiss Interior Company is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?
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