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 43,000 speaker sets: Sales Variable costs Fixed costs $3,526,000 881,500 2,310,000 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?
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 43,000 speaker sets: Sales Variable costs Fixed costs $3,526,000 881,500 2,310,000 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?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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please answer all requirements completely and correctly this time with all working please answer in text not image
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 43,000 speaker sets:
Sales
Variable costs
Fixed costs
$3,526,000
881,500
2,310,000
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.
Transcribed Image Text:Required 1 Required 2 Required 3 Required 4
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. (Do not round intermediate calculations and round your final answers
to nearest whole dollar.)
Current income
Required dollar sales
Required 1 Required 2 Required 3 Required 4
Determine the break-even point in speaker sets if operations are shifted to Mexico. (Round your final answer up to nearest
whole number.)
Break-even point 110,334 units
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? (Round your intermediate unit calculations to the
nearest whole number and round your final answer to the nearest whole dollar.)
b. If fixed costs remain constant, by how much must unit variable cost change? (Round your intermediate unit calculations to
the nearest whole number and round your final answer to 2 decimal places.)
a.
b.
$ 334,500
$ 3,860,500
a.
b.
Fixed costs
Variable costs
C.
d.
by
by
Determine the impact (increase, decrease, or no effect) of the following operating changes.
per unit
Effect of an increase in direct material costs on the break-even point.
Effect of an increase in fixed administrative costs on the unit contribution margin.
Effect of an increase in the unit contribution margin on net income.
Effect of a decrease in the number of units sold on the break-even point.
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