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Question - Manch-Orch Incorporated provides call support center services. They offer two types of services: low-tech and high-tech.
Here is financial information for each of the service types:
Low-tech
High-tech
Total revenues
$3,000
$9,000
Total customer-specific variable costs
$1,000
$1,500
Total customer-specific fixed costs
$400
Total allocated general fixed costs
$100
$180
Activities are measured in service hours.
The sales price per hour for low-tech is $15 per hour.
The sales price per hour for high-tech is $30 per hour.
The variable costs per hour is $5 per hour (for both low-tech and high-tech services).
Required - Calculate the break-even point in hours for the firm as a whole, using the weighted average contribution margin method (i.e., composite method).
Find what conditions Would be a valid or invalid assumption? Managers often assume a strictly linear relationship between cost and the level of activity.
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