Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $ 52,000 Net Income $ 60,000
Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $ 52,000 Net Income $ 60,000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below.
What will be the impact on the break-even point if Straight-Line purchases the new computer?
- What will be the impact on net operating income if Straight-Line purchases the new computer?
- What would be your recommendation to Staight-Line regarding this purchase?
| Units sold | 1400 | |
| Sales price per unit | $ 225 | |
| Variable cost per unit | $ 145 | |
| Fixed costs | $ 52,000 | |
| Break-even in units | 650 | |
| Contribution margin ratio | 0.36 | |
| Break-even in dollars | $ 146,250 | |
| Sales | $ 315,000 | |
| Variable costs | $ 203,000 | |
| Fixed costs | $ 52,000 | |
| Net Income | $ 60,000 |
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education