An Engineering consultant firm measures its output in a standard hour unit, which is a function of the personnel grade levels in the professional stuff. The variable cost is $62 per standard service hour. The charge-out rate (i.e., selling price) is $85.56 per hour. The maximum output of the firm is 160,000 hours per year, and its fixed cost is $2,024,000 per year. For this firm: (a) What is the breakeven point in standard service hours and in percentage of total capacity? (b) What is the percentage reduction in breakeven (sensitivity) if fixed costs are reduced 10%; if variable cost per hour is reduced 10%; and if the selling price per unit is increased by 10%.
An Engineering consultant firm measures its output in a standard hour unit, which is a function of the personnel grade levels in the professional stuff. The variable cost is $62 per standard service hour. The charge-out rate (i.e., selling price) is $85.56 per hour. The maximum output of the firm is 160,000 hours per year, and its fixed cost is $2,024,000 per year. For this firm:
(a) What is the breakeven point in standard service hours and in percentage of total capacity?
(b) What is the percentage reduction in breakeven (sensitivity) if fixed costs are reduced 10%; if variable cost per hour is reduced 10%; and if the selling price per unit is increased by 10%.
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