The E&G Company has been incurring losses in the past years during the third quarter of the year. Management is considering shutting down operations during this period to avoid continued losses. Allocated fixed operational monthly costs were determined from records amount to 50,000. Average monthly sales during the year except the third quarter are 10,000 units. The company averages only 3,000 units monthly during the third quarter. Units are sold at a price of 30 each. Variable cost to produce and sell the units are 18 per unit. If management decides to shut down operations they would save on allocated fixed costs of 40% but will incur additional shutdown costs of 5,000 per month. What would be the advantage of continued operations? A. 33,000 B. 30,000 C. 40,000 D. 35,000
The E&G Company has been incurring losses in the past years during the third quarter of the year. Management is considering shutting down operations during this period to avoid continued losses. Allocated fixed operational monthly costs were determined from records amount to 50,000. Average monthly sales during the year except the third quarter are 10,000 units.
The company averages only 3,000 units monthly during the third quarter. Units are sold at a price of 30 each. Variable cost to produce and sell the units are 18 per unit. If management decides to shut down operations they would save on allocated fixed costs of 40% but will incur additional shutdown costs of 5,000 per month. What would be the advantage of continued operations?
A. 33,000
B. 30,000
C. 40,000
D. 35,000
Step by step
Solved in 3 steps
