A. Jack’s Grocery is manufacturing a ‘store brand’ item that has a variable cost of $0.75 per unit and a selling price of $1.25 per unit. Fixed costs are $12,000. Current volume is 50,000 units. The firm can substantially improve product quality by adding a new piece of equipment at an additional fixed cost of $5,000. Variable cost would increase to $1.00 but their volume should increase to 70,000 units due to the higher quality product. Should the company buy the new equipment? B. What are the two breakeven points [both in dollars and in units] for the two processes considered in the problem in (a) above? C. Develop a breakeven chart for the problem in (a) above. D. Bweupe & Sons has fixed costs of K10, 000 for the period. Their direct labour cost is K1.50 per unit and material input cost is K0.75 per unit. The selling price per unit is K4.00. i. Calculate the Break-Even point in units. ii. What does it translate to in Kwacha?
A. Jack’s Grocery is manufacturing a ‘store brand’ item that has a variable cost of
$0.75 per unit and a selling price of $1.25 per unit. Fixed costs are $12,000.
Current volume is 50,000 units. The firm can substantially improve product quality
by adding a new piece of equipment at an additional fixed cost of $5,000. Variable
cost would increase to $1.00 but their volume should increase to 70,000 units due
to the higher quality product.
Should the company buy the new equipment?
B. What are the two breakeven points [both in dollars and in units] for the two
processes considered in the problem in (a) above?
C. Develop a breakeven chart for the problem in (a) above.
D. Bweupe & Sons has fixed costs of K10, 000 for the period. Their direct labour cost
is K1.50 per unit and material input cost is K0.75 per unit. The selling price per
unit is K4.00.
i. Calculate the Break-Even point in units.
ii. What does it translate to in Kwacha?
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
