Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets: Sales$3,360,000 Variable costs 840,000 Fixed costs 2,280,000 Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18 per set; annual fixed costs are anticipated to be $1,984,000. (In the following requirements, ignore income taxes.)Required:Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.Determine the break-even point in speaker sets if operations are shifted to Mexico.Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.If variable costs remain constant, by how much must fixed costs change?If fixed costs remain constant, by how much must unit variable cost change?Determine the impact (increase, decrease, or no effect) of the following operating changes.

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Answered: Houston-based Advanced Electronics…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter20: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 3CMA: Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and...

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Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 42,000 speaker sets:


Sales	$	3,360,000
Variable costs		840,000
Fixed costs		2,280,000

Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18 per set; annual fixed costs are anticipated to be $1,984,000. (In the following requirements, ignore income taxes.)

Required:

Calculate the company’s current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.
Determine the break-even point in speaker sets if operations are shifted to Mexico.
Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.

If variable costs remain constant, by how much must fixed costs change?
If fixed costs remain constant, by how much must unit variable cost change?

Determine the impact (increase, decrease, or no effect) of the following operating changes.

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