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Alliance Enterprises is considering extensively modifying their manufacturing equipment. The modifications will result in less wastage of materials, which will reduce variable manufacturing costs and introduce changes to the production process that will improve product quality. This will allow Alliance to increase the selling price of the product. Annual fixed costs are expected to increase to $930,000 if the modifications are made. Expected fixed and variable costs as well as the selling prices are shown below: Cost Item Selling price per unit Variable cost per unit Fixed costs Required: 1. Determine Alliance Enterprises' break-even point in units with the existing equipment and with the modified equipment. Existing equipment Modified equipment Break-Even Point Sales level Existing Equipment Modified Equipment $ 23: $ 25 19 440,000 19 930,000 units units units 2. Determine the sales level in units at which the modified equipment will achieve a 8% target profit-to-sales ratio (ignore taxes). D

Alliance Enterprises is considering extensively modifying their manufacturing equipment. The modifications will result in less wastage of materials, which will reduce variable manufacturing costs and introduce changes to the production process that will improve product quality. This will allow Alliance to increase the selling price of the product. Annual fixed costs are expected to increase to $930,000 if the modifications are made. Expected fixed and variable costs as well as the selling prices are shown below: Cost Item Selling price per unit Variable cost per unit Fixed costs Required: 1. Determine Alliance Enterprises' break-even point in units with the existing equipment and with the modified equipment. Existing equipment Modified equipment Break-Even Point Sales level Existing Equipment Modified Equipment $ 23: $ 25 19 440,000 19 930,000 units units units 2. Determine the sales level in units at which the modified equipment will achieve a 8% target profit-to-sales ratio (ignore taxes). D

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Alliance Enterprises is considering extensively modifying their manufacturing equipment. The modifications will result in less wastage of materials, which will reduce variable manufacturing costs and introduce changes to the production process that will improve product quality. This will allow Alliance to increase the selling price of the product. Annual fixed costs are expected to increase to $930,000 if the modifications are made. Expected fixed and variable costs as well as the selling prices are shown below: Cost Item Selling price per unit Variable cost per unit Fixed costs Existing equipment Modified equipment Required: 1. Determine Alliance Enterprises' break-even point in units with the existing equipment and with the modified equipment. Break-Even Point Sales level Existing Equipment Modified Equipment $ V $ units 23 19 440,000 units units 25 19 930,000 2. Determine the sales level in units at which the modified equipment will achieve a 8% target profit-to-sales ratio (ignore taxes).
Transcribed Image Text:Alliance Enterprises is considering extensively modifying their manufacturing equipment. The modifications will result in less wastage of materials, which will reduce variable manufacturing costs and introduce changes to the production process that will improve product quality. This will allow Alliance to increase the selling price of the product. Annual fixed costs are expected to increase to $930,000 if the modifications are made. Expected fixed and variable costs as well as the selling prices are shown below: Cost Item Selling price per unit Variable cost per unit Fixed costs Existing equipment Modified equipment Required: 1. Determine Alliance Enterprises' break-even point in units with the existing equipment and with the modified equipment. Break-Even Point Sales level Existing Equipment Modified Equipment $ V $ units 23 19 440,000 units units 25 19 930,000 2. Determine the sales level in units at which the modified equipment will achieve a 8% target profit-to-sales ratio (ignore taxes).
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