Fixed costs for manufacturing a certain product are $100,000 per year.Variable costs are $25 per unit. The product can be purchased fromanother manufacturer for a flat rate of $48 per unit. The number of unitsthat must be used each year in order for the manufacture and purchaseof alternatives to break even is closest to

Let's break it down step by step:Fixed Costs: $100,000 per yearVariable Costs: $25 per unitPurchase…

Answered: Fixed costs for manufacturing a certain…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section14.A: Breakeven Analysis

Problem 4P

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Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $18,250 per year. The information they will use to consider these changes is shown here.
Calculate the total incremental cost of making 78,000 and buying 78,000 units. Should the company continue to manufacture the part, or should it buy the part from the outside supplier?
Process A has a fixed cost of $160,000 per year and a variable cost of $50 per unit. For Process B, 10 units can be produced in 1 day at a cost of $200. If the company’s MARR is 10% per year, what will the annual fixed cost have to be for Process B in order for the two alternatives to have the same annual total cost at a production rate of 1000 units per year?
Three mutually exclusive design alternatives are being considered. The estimated sales and cost data for each alternative are given. The MARR is 20% per year. Annual revenues are based on the number of units sold and the selling price. Annual expenses are based on fixed and variable costs. Determine which selection is preferable based on AW. State your assumptions.
A specified part can be obtained by either of two methods. Method 1 will have fixed costs of $75,000 per year and a variable cost of $25 per unit. Method 2 will have fixed costs of $90,000 per year and a variable cost of $17 per unit. The number of units that must be produced each year for the two methods to be equally attractive is closest to _____.
Process A has a fixed cost of $16,000 per year and a variable cost of $40 per unit. For process B, 5 units can be produced in 1 day at a cost of $125. If the company's MARR is 10% per year, the fixed cost of process B that will make the two alternatives have the same annual cost at a production rate of 1000 units per year is closest to: Oa. $18,000 O b. $27.000 O C. Over $30,000 Od. Less than $10,000
MicroCam produces a single product. Variable cost per unit is $25, and fixed costs are $95,000 per year. If the firm sells 5,000 units per year, what price should be charged for each unit to earn $35,000?
The Falling Snow Company is considering production of a lighted world globe that the company would price at a markup of 0.30 above full cost. Management estimates that the variable cost of the globe will be $62 per unit and fixed costs per year will be $240,000. Assuming sales of 1,200 units, what is the full selling price of a globe with a 0.30 markup? Round to two decimal places.
Currently, the unit selling price of a product is $200, the unit variable cost is $160, and the total fixed costs are $408,000. A proposal is being evaluated to increase the unit selling price to $220. a. Compute the current break-even sales (units). 8,400 X units b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased and all costs remain constant. 5,600 X units
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.10. The machine will increase fixed costs by $12,000 per year. The information they will use to consider these changes is shown here. A. What will the impact be on the break-even point if Flanders purchases the new machinery? Round per unit cost answers to two decimal places. Current New Machine Units Sold 221,000 Sales Price Per Unit $2.10 Variable Cost Per Unit $1.70 Contribution Margin Per Unit $0.40 %24 Fixed Costs $60,000 Break-Even (in units) 150,000 Break-Even (in dollars) $315,000 B. What will the impact be on net operating income if Flanders purchases the new machinery? Current New Machine Sales $464,100 Variable Costs 375,700 Contribution Margin $88,400 Fixed Costs 60,000 Net Income (Loss) $28,400 C. What would your recommendation be to Flanders regarding this purchase? a. The new equipment will increase fixed costs substantially but net income will still…
A product currently sells for $12 per unit. The variable costs are $4 per unit, and 10,000 units are sold annually and a profit of $30,000 is realized per year. A new design will increase the variable costs by 20% and Fixed Costs by 10% but sales will increase to 12,000 units per year. (a) At what selling price do we break even with the new design?. (b) If the selling price is to be kept same ($12/unit) what will the annual profit be?

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