Compute the budgeted break-even point

Reference no: EM13154753

A division of Hewelett-Packard Company changed its production operations from one where a large labor force assembled electronic components to an automated production facility dominated by computer-controlled robots. The change was necessary because of fierce competitive pressures. Improvements in quality, reliability, and flexibility of production schedules were necessary just to match competition. As a result of the change, variable costs fell and fixed costs increased, as shown in the following assumed budgets:

Old Production Operation Old Production Operation

Unit variable cost

Material $0.88 $0.88

Labor $1.22 0.22

Total per unit $2.10 $1.10

Monthly fixed costs

Rent and depreciation 450,000.00 $875,000.00

Supervisory labor 80,000.00 175,000.00

Other 50,000.00 90,000.00

Total per month $580,000.00 $1,140,000.00

Expected volume is 600,000 units per month, with each unit selling for $3.10 Capacity is 800,000 units.

1. Compute the budgeted profit as the expected volume of 600,000 units under both the old and the new production environments.

2. Compute the budgeted break-even point under both the old and the new production environments.

3. Discuss the effect on profits if volume falls to 500,000 units under both the old and the new production environments.

4. Discuss the effect on profits if volume increases to 700,000 units under both the old and the new production environments.

5. Comment on the riskiness of the new operation versus the old operation.

Reference no: EM13154753

Questions Cloud

What percentage of men in footer club are over six foot : What percentage of 25-year-old mean are over 6 feet 2 inches tall? What percentage of men in the 6-footer club are over 6 foot 5 inches?

What is the new volume occupied by the gas : A gas occupying 28mL at standard conditions is heated to 18C while the pressure is reduced to 0.98221 atm. What is the new volume occupied by the gas? Answer in units of mL.

Compare the above two outcomes and explain the differences : Solve the equilibrium in this sequential game. Be sure to characterize the quantity choices, the market price, and the resulting profits. c) Compare the above two outcomes and explain the differences.

Problem regarding accrual basis taxpayer : Lisa Corporation, a calendar year, accrual basis taxpayer, provides the following information for this year and asks you to prepare Schedule M-1:

Compute the budgeted break-even point : Compute the budgeted profit as the expected volume of 600,000 units under both the old and the new production environments. Compute the budgeted break-even point under both the old and the new production environments.

Explain what is meant by first-mover advantage : Explain what is meant by "first-mover" advantage and how each of these firms was able to control a relatively large share of their respective markets.

Company''s ability to survive in the short-term : What can a balance sheet tell an investor about the value of the company? How do you measure a company's ability to survive in the short-term?

Intercept be meaningful if regression represents blockbuster : (a) Interpret the slope of the fitted regression Sales = 842 - 37.5 Price. (b) If Price = 20, what is the prediction for Sales? (c) Would the intercept be meaningful if this regression represents DVD sales at Blockbuster?

Explain the concept of countertrade : Explain the concept of countertrade. When does counter trade make sense? How does counter trade help solve the nonconvertability problem?

User Account

All Pages