Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each. 1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.) 2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each. 1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.) 2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 9E: Gelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs...
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Lewin Corp. has the capacity to produce 100,000 units of product per year. The fixed cost of operating the plant is $200,000 per year, while the variable production costs are $13 per unit. This year the firm anticipates producing 80,000 units and selling them for $20 each.
1) If a foreign distributor offers to buy 10,000 units this year for $14, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
2) If the order from the foreign distributor is for 25,000 units, what impact would this sale have on overall profits? (Provide dollar amount and state whether it is an increase or decrease.)
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