Exercise #3Megacorp and Gadgetron are two competing gadget manufacturers. Information about the price and cost structures of the two manufacturers are given below. MegacorpGadgetronSelling price per unit160160Variable cost per unit11080Fixed cost per month46,000100,000 Required:Calculate the sales volume that will result in Megacorp and Gadgetron having the same operating profit.Prepare a profit-volume graph by plotting profit as a function of the sales volume.Hint: Identify the point where sales volume is zero (i.e., fixed cost on y-intercept) and the break-even point (i.e., x-intercept where profit is zero) and connect the dots.

1) The sales volume that will result in Megacorp and Gadgetron having the same operating profit is…

Answered: gacorp and Gadgetron are two competing…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 5CE: Refer to Cornerstone Exercise 3.4 for data on Dohini Manufacturing Companys purchasing cost and...

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Exercise #3

Megacorp and Gadgetron are two competing gadget manufacturers. Information about the price and cost structures of the two manufacturers are given below.

	Megacorp	Gadgetron
Selling price per unit	160	160
Variable cost per unit	110	80
Fixed cost per month	46,000	100,000

Required:

Calculate the sales volume that will result in Megacorp and Gadgetron having the same operating profit.
Prepare a profit-volume graph by plotting profit as a function of the sales volume.
Hint: Identify the point where sales volume is zero (i.e., fixed cost on y-intercept) and the break-even point (i.e., x-intercept where profit is zero) and connect the dots.

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