Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.
Caribann is a company with the potential to produce 100,000 units of its sole product annually. Caribann's interplay of costs and production capacity prompts an analysis that will guide it in navigating the balance between revenue generation and cost management.
The following information is available:
Selling price - -----------------------------------------------------$42
per unit Variable
per unit Fixed manufacturing costs---------------------------------------$360,000
annually Fixed marketing and administrative costs ---------------------$240,000
annually Variable marketing and administrative costs -----------------$4 per unit Required:
In attempting to achieve better results in the marketplace, management has been looking at changing the reward system for marketing, distribution and sales personnel. This would result in an increase in variable marketing and administrative costs by $2 per unit, and would reduce fixed marketing and distribution costs by $100,000:
Calculate the number of units required to breakeven if management implemented the changes
Explain If management should pursue the changes
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