If the plant is shut down for 3 months fixed manufacturing

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Reference no: EM13608781

Baker company normally produces and sells 80,000 zets per year at a selling price of $40 per unit.

Unit costs: Direct materials:9.50
Direct labor: 10.00
variable manufacturing overhead: 2.80
fixed manufacturing overhead: 5.00 (400,000 total)
variable selling expenses: 1.70
fixed selling expenses: 4.50 (360,000 total)
total cost per unit: 33.50

one of the materials used in producing a zet is received from a country undergoing civil unrest and will not be able to ship the material needed for 3 months. If the plant is shut down for 3 months, fixed manufacturing costs would reduce by 40%, fixed selling expenses would continue at two thirds the normal level. What would be the impact on profits of closing the plant for the 3 month period?

Reference no: EM13608781

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