FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Kingston Corporation has one of its manufacturing plants operating on a singleshift five-day week. The plant is operating at its full capacity (48,000 units of output per week) without the use of overtime or extra shifts. Fixed costs for single-shift operation amount to $180,000 per week. The
• Option 1. Increase the plant’s output to 72,000 units a week by adding overtime, by adding Saturday operations, or both. No increase in fixed costs is entailed, but the variable cost is $72 per unit for any output in excess of 48,000 units per week, up to a 72,000-unit capacity.
• Option 2. Operate a second shift. The maximum capacity of the second shift is 42,000 units per week. The variable cost of the second shift is $63 per unit, and the operation of a second shift entails additional fixed costs of $27,000 per week. FIND the differential cost for 2 options? Also Find the Break-even volume.
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