A company manufactures screwdrivers and has fixed costs of SEK 3,400,000 and variable costs per screwdriver of SEK 6. These costs are not assumed to change with varying production volumes. According to company policy, the sales price is set at double the purchase price. The company's production capacity for screwdrivers is 900,000, but the target for production is for various strategic reasons set at a utilization rate of 70%. Calculate the company's safety margin in SEK, when the utilization rate has been reached and all produced screwdrivers have been sold.

A company manufactures screwdrivers and has fixed costs of SEK 3,400,000 and variable costs per screwdriver of SEK 6. These costs are not assumed to change with varying production volumes. According to company policy, the sales price is set at double the purchase price. The company's production capacity for screwdrivers is 900,000, but the target for production is for various strategic reasons set at a utilization rate of 70%. Calculate the company's safety margin in SEK, when the utilization rate has been reached and all produced screwdrivers have been sold.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 5E

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