Reference no: EM13903349
CVP analysis. A company is deciding which of two new thermostat systems to produce and sell. The Basic system has variable costs of $8.00 per unit, excluding sales commissions, and annual fixed costs of $520,000; the Deluxe system has variable costs of $6.40, excluding sales commissions, and fixed costs of $672,000. The company's selling price is $32 per unit for the Basic model and $38 for the Deluxe model. The company pays a 10 percent sales commission.
a. Which of the two systems will be more profitable for the firm if sales for either system are expected to average 150,000 units per year?
b. How many units must the company sell to break even if it selects the Deluxe system?
c. Suppose the Basic system requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $224,000 and will be depreciated over a 10-year life by the straight-line method. How many units must the company sell to earn $40,000 of income, after considering depreciation, if the Basic system is selected?
d. Now, ignore the information presented in part c. Write a report that explains to management the level of volume at which it should be indifferent between the Basic system and the Deluxe system.
|
Payment for fire insurance policy
: For each of the following events, explain the effect it would have on a pizza restaurant's short-run costs. Draw a separate graph asked in each part. (a) The payment for fire insurance policy increases. Draw the change in the AFC and TFC curves if ..
|
|
Graph the farmer production function
: If Farmer Jones plants no seeds on his farm, he gets no harvest. If he plants 1 bag of seeds,he gets 3 bushels of wheat. If he plants 2 bags, he gets 5 bushels. If he plants 3 bags, he gets6 bushels. A bag of seeds costs $100, and seeds are his on..
|
|
Preferences for public and private goods
: Is one approach more likely than the other to lead to a social optimum (i.e., be most consistent with consumer preferences for public and private goods)? What factors or conditions might favor one approach over another?
|
|
Charge a monopoly price for electricity
: The CEO of the company claims that because all of the profits will be given back to the citizens, it makes economic sense to charge a monopoly price for electricity. Do you agree with the CEO's argument? What are the social costs of monopoly power..
|
|
How many units must the company sell to break even
: Which of the two systems will be more profitable for the firm if sales for either system are expected to average 150,000 units per year? How many units must the company sell to break even if it selects the Deluxe system?
|
|
What is the rationale for health care organizations
: What is the rationale for health care organizations' adoption of strategic management? Contrast management, personnel, and human resources management
|
|
Show the fit between your technology is and the business
: able to show the fit between your technology IS and the business
|
|
Determining the brink of bankruptcy
: Due to unforeseen events in the aerospace industry, in the second year of the contract ERUS is in the brink of bankruptcy. It tells Big Bird that unless it increase the engine price to $300000, it will go bankrupt.
|
|
Number of hamburger that he can afford
: If the consumer continues to buy 5 units of cake, what is the largest number of hamburger that he can afford?
|