Consider two different cost structures for the same firm. The first has higher variable costs per unit (V=56) but lower fixed cost (F=2,107). If the firm invests in a labor saving machine the cost structure will tip towards fixed costs with variable cost per unit V34 and fxed costs Fa3,582. The selling price is the same for both scenarios P=100) and the current level of production is 80. Calculate the profit under each scenario and how that changes as unit sales increase to 100; also, as they decrease to 60. What is the percent change in profits from 80 units to 100 units under the scenario with higher variable costs?
Consider two different cost structures for the same firm. The first has higher variable costs per unit (V=56) but lower fixed cost (F=2,107). If the firm invests in a labor saving machine the cost structure will tip towards fixed costs with variable cost per unit V34 and fxed costs Fa3,582. The selling price is the same for both scenarios P=100) and the current level of production is 80. Calculate the profit under each scenario and how that changes as unit sales increase to 100; also, as they decrease to 60. What is the percent change in profits from 80 units to 100 units under the scenario with higher variable costs?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider two different cost structures for the same firm. The first has higher variable costs per unit (V=56) but lower fixed cost (F=2,107). If the firm invests in a labor
saving machine the cost structure will tip towards fixed costs with variable cost per unit V34 and fixed costs Fa3,582. The selling price is the same for both scenarios
P=100) and the current level of production is 80. Calculate the profit under each soenario and how that changes as unit sales increase to 100; also, as they decrease to
60. What is the percent change in profits from 80 units to 100 units under the scenario with higher variable costs?
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