Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each. 1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.) 2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each. 1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.) 2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each.
1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
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