Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 44,000 speaker sets: Sales Variable costs $3,608,000 902,000 2,310,000 Fixed costs Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18.00 per set; annual fixed costs are anticipated to be $1,986,000. (In the following requirements, ignore income taxes.) Required: 1. Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. 2. Determine the break-even point in speaker sets if operations are shifted to Mexico. 3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States. a. If variable costs remain constant, by how much must fixed costs change? b. If fixed costs remain constant, by how much must unit variable cost change? 4. Determine the impact (increase, decrease, or no effect) of the following operating changes. O Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States
Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 44,000 speaker sets: Sales Variable costs $3,608,000 902,000 2,310,000 Fixed costs Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18.00 per set; annual fixed costs are anticipated to be $1,986,000. (In the following requirements, ignore income taxes.) Required: 1. Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States. 2. Determine the break-even point in speaker sets if operations are shifted to Mexico. 3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States. a. If variable costs remain constant, by how much must fixed costs change? b. If fixed costs remain constant, by how much must unit variable cost change? 4. Determine the impact (increase, decrease, or no effect) of the following operating changes. O Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period
just ended when the company produced and sold 44,000 speaker sets:
Sales
Variable costs
$3,608,000
902,000
2,310,000
Fixed costs
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to
average $18.00 per set; annual fixed costs are anticipated to be $1,986,000. (In the following requirements, ignore income taxes.)
Required:
1. Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that
manufacturing operations remain in the United States.
2. Determine the break-even point in speaker sets if operations are shifted to Mexico.
3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.
a. If variable costs remain constant, by how much must fixed costs change?
b. If fixed costs remain constant, by how much must unit variable cost change?
4. Determine the impact (increase, decrease, or no effect) of the following operating changes.
O Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2
Required 3 Required 4
Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United
States
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