4.19 Waterfront Division of Maxwell Products manufactures a component used in the production of garden tools. The President of that division states that the division has the capacity to produce 5,000 units of this component each month. The fixed costs of production are P10,000 each month. The President admits that it will take some time before the plant has enough orders to operate at capacity but those sales should range between 3,000 and 4,000 units per month. He is interested in examining what happens to the margin of safety and the operating leverage over a range of activity. To help with this analysis, the accountant tells you that each unit is sold for P20, and the variable unit cost is P15. Instructions:

4.19 Waterfront Division of Maxwell Products manufactures a component used in the production of garden tools. The President of that division states that the division has the capacity to produce 5,000 units of this component each month. The fixed costs of production are P10,000 each month. The President admits that it will take some time before the plant has enough orders to operate at capacity but those sales should range between 3,000 and 4,000 units per month. He is interested in examining what happens to the margin of safety and the operating leverage over a range of activity. To help with this analysis, the accountant tells you that each unit is sold for P20, and the variable unit cost is P15. Instructions:

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter16: Financial Planning And Control

Section: Chapter Questions

Problem 9PROB

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