International Data Systems' information on revenue and costs is relevant only up to a sales volume of 120,000 units. After 120,000 units, the market becomes saturated and the price per unit falls from $8.00 to $5.80. Also, there are cost overruns at a production volume of over 120,000 units, and variable cost per unit goes up from $4.00 to $4.50. Fixed costs remain the same at $70,000. a. Compute operating income at 120,000 units. b. Compute operating income at 220,000 units.
International Data Systems' information on revenue and costs is relevant only up to a sales volume of 120,000 units. After 120,000 units, the market becomes saturated and the price per unit falls from $8.00 to $5.80. Also, there are cost overruns at a production volume of over 120,000 units, and variable cost per unit goes up from $4.00 to $4.50. Fixed costs remain the same at $70,000. a. Compute operating income at 120,000 units. b. Compute operating income at 220,000 units.
Practical Management Science
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ISBN:9781337406659
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International Data Systems' information on revenue and costs is relevant only up to a sales volume of 120,000 units. After 120,000 units, the market becomes saturated and the price per unit falls from $8.00 to $5.80. Also, there are cost overruns at a production volume of over 120,000 units, and variable cost per unit goes up from $4.00 to $4.50. Fixed costs remain the same at $70,000.
a. Compute operating income at 120,000 units.
b. Compute operating income at 220,000 units.
Expert Solution
Step 1
Given information -
Fixed cost = $70,000
Price per unit = $8
Variable cost per unit = $4
Units = 1,20,000
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