Birch Company normally produces and sells 44,000 units of RG-6 each month. The selling price is $30 per unit, variable costs are $10per unit, fixed manufacturing overhead costs total $200,000 per month, and fixed selling costs total $48,000 per month.Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales totemporarily drop to only 10,000 units per month. Birch Company estimates the strikes will last for two months, after which time sales ofRG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing its own plant during thestrike, which would reduce fixed manufacturing overhead costs by $42,000 per month and fixed selling costs by 10%. Start-up costs atthe end of the shutdown would total $15,000. Because Birch Company uses Lean Production methods, no inventories are on hand.Required:1. What is the financial advantage (disadvantage) if Birch closes its own plant for two months?2. Should Birch close the plant for two months?3. At what level of unit sales for the two-month period would Birch Company be indifferent between closing the plant or keeping itopen?

To solve this problem, we need to calculate the total costs and revenues for the two scenarios…

Answered: Birch Company normally produces and…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter8: Tactical Decision-making And Relevant Analysis

Section: Chapter Questions

Problem 54P

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Birch Company normally produces and sells 41000 units of RG-6 each month. The selling price is $30 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $165,000 per month, and fixed selling costs total $48,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $48,000 per month and its foxed seling costs by 10%. Start-up costs at the end of the shutdown period would total $16,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvanitage) if Birch…
Birch Company normally produces and sells 48,000 units of RG-6 each month. The selling price is $20 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $155,000 per month, and fixed selling costs total $46,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 10,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $47,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $13,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if Birch…
Birch Company normally produces and sells 44,000 units of RG-6 each month. The selling price is $30 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $195,000 per month, and fixed selling costs total $46,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 9,000 units per month. Birch Company estimates the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing its own plant during the strike, which would reduce fixed manufacturing overhead costs by $46,000 per month and fixed selling costs by 10%. Start-up costs at the end of the shutdown would total $16,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if Birch closes its own plant for…
Birch Company normally produces and sells 48,000 units of RG-6 each month. The selling price is $30 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $200,000 per month, and fixed selling costs total $30,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 9,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $47,000 per month and its fixed selling costs by 10%. Start-up costs at the end of the shutdown period would total $15,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. What is the financial advantage (disadvantage) if Birch…
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Birch company normally produces and sells 44,000 units of RG-6 each month. The selling price is $20 per unit, variable costs are $10 per unit, fixed manufacturing overhead costs total $155,000 per month, and fixed selling costs total $42,000 per month. Employment-contract strikes in the companies that purchased the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 11,000 units per month birch company estimates that the strike will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $42,000 per month and its fixed selling costs by 10%. Startup costs at the end of the shutdown period would total $14,000. Because Birch Company uses Lean Production methods, no inventories are on hand. Required: 1. what is the financial advantage (disadvantage) if Birch…
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What are the answers to Required 1 and 2?
Birch Company normally produces and sells 49,000 units of RG-6 each month. RG-6 is a small electrical relay used as a component part in the automotive industry. The selling price is $25 per unit, variable costs are $16 per unit, fixed manufacturing overhead costs total $165,000 per month, and fixed selling costs total $36,000 per month. Employment-contract strikes in the companies that purchase the bulk of the RG-6 units have caused Birch Company's sales to temporarily drop to only 8,000 units per month. Birch Company estimates that the strikes will last for two months, after which time sales of RG-6 should return to normal. Due to the current low level of sales, Birch Company is thinking about closing down its own plant during the strike, which would reduce its fixed manufacturing overhead costs by $46,000 per month and its fixed selling costs by 9%. Start-up costs at the end of the shutdown period would total $13,000. Because Birch Company uses Lean Production methods, no inventories…

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