Reference no: EM132928010

Question - You work for the controller at Green Partxs Inc, a small specialized supplier to the auto parts industry. Currently, it produces 20,000 units per month, using two shifts, with each shift producing 10,000 units each month. However, the bankruptcy of one of its major customers means that production must be cut to 11,000 units per month within the next six months. The company does not expect to regain the lost business for at least another two years, but it is confident that it can still make a profit at this lower production level.

Requirements -

Determine the impact on variable costs due to the reduction in production. Briefly explain.

Determine the impact on fixed costs of the reduction in production and how the Green Partxs management might reduce the fixed costs

What  else  could  the  company  do  to  increase  profits  and  offset  the  impact  of  the  reduced production level due to the bankruptcy of the major customer?