Alpine Gear manufactures outdoor equipment. One of the company's products, a camping tent, sells for $175. The tents are manufactured in a traditional facility with high labor costs. Variable costs total $105 per tent, of which 60% is direct labor cost. Over the past year, the company sold 18,000 tents, with the following operating results: Accounting data for Alpine Gear: . Sales (18,000 tents): $3,150,000 Variable expenses: $1,890,000 Contribution margin: $1,260,000 Fixed expenses: $840,000 ⚫ Net operating income: $420,000 Management is considering implementing a new production system. The new system would reduce variable costs by 25%, but would cause fixed costs to increase by 70%. If the new system is implemented, how many tents will have to be sold next year to earn the same net operating income, $420,000, as last year?

Alpine Gear manufactures outdoor equipment. One of the company's products, a camping tent, sells for $175. The tents are manufactured in a traditional facility with high labor costs. Variable costs total $105 per tent, of which 60% is direct labor cost. Over the past year, the company sold 18,000 tents, with the following operating results: Accounting data for Alpine Gear: . Sales (18,000 tents): $3,150,000 Variable expenses: $1,890,000 Contribution margin: $1,260,000 Fixed expenses: $840,000 ⚫ Net operating income: $420,000 Management is considering implementing a new production system. The new system would reduce variable costs by 25%, but would cause fixed costs to increase by 70%. If the new system is implemented, how many tents will have to be sold next year to earn the same net operating income, $420,000, as last year?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter2: Building Blocks Of Managerial Accounting

Section: Chapter Questions

Problem 4EB: Roper Furniture manufactures office furniture and tracks cost data across their process. The...

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