ABC company sells its products for $16 per item. The fixed cost of the company are 240000 per year and the variable cost per item is $8. The management has been offered an opportunity to move into a smaller facility, which would lower the fixed cost to 200000 however, the variable cost per item would actually increase to $9 at this new facility management had come to your advice. Please calculate the brake even units required for both of the above scenarios. Give these 2 numbers to management. Then give your recommendations to the management team. As to whether they should move to the new facility or not.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question

ABC company sells its products for $16 per item. The fixed cost of the company are 240000 per year and the variable cost per item is $8. The management has been offered an opportunity to move into a smaller facility, which would lower the fixed cost to 200000 however, the variable cost per item would actually increase to $9 at this new facility management had come to your advice. Please calculate the brake even units required for both of the above scenarios. Give these 2 numbers to management. Then give your recommendations to the management team. As to whether they should move to the new facility or not. 

 

Expert Solution
steps

Step by step

Solved in 3 steps with 2 images

Blurred answer
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education