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Question - Auto Tires Inc. sells tires to service stations for an average of $45 each. The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000. Other monthly fixed costs of the company total $12,000.
Required -
a. What is the break-even level in tires?
b. What is the margin of safety assuming sales total $90,000?
c. What is the break-even level in tires assuming variable costs increase by 20 percent?
d. What is the break-even level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150?
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It can produce to outside customers on the intermediate market. What is the acceptable range, if any, for the transfer price between the two divisions?
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