Solution-Should the company purchase the radio ads

Should the company purchase the radio ads

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Reference no: EM133171723

Question - COST-VOLUME-PROFIT (CVP) ANALYSIS - Abner Corporation makes a product that sells for $200 per unit. The variable costs to make this product are $120 per unit. Fixed costs total $500,000 for a year. Abner currently sells 7,500 units each year.

1. Calculate the number of units that Abner must sell to break even.

2. Abner can purchase equipment that will automate its production facility. This equipment will raise Abner's fixed costs to $600,000 per year. Automation will cause the product's variable costs to drop to $100 per unit. Assume target profit of $200,000.

3. Abner estimates that $40,000 of radio advertising could increase the company's sales by 10%. Should the company purchase the radio ads? (Use the original cost data to answer this question; do not include any changes due to factory automation.)

Reference no: EM133171723

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Should the company purchase the radio ads

Reference no: EM133171723

Reference no: EM133171723

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