Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $ 52,000 Net Income $ 60,000
Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below. What will be the impact on the break-even point if Straight-Line purchases the new computer? What will be the impact on net operating income if Straight-Line purchases the new computer? What would be your recommendation to Staight-Line regarding this purchase? Units sold 1400 Sales price per unit $ 225 Variable cost per unit $ 145 Fixed costs $ 52,000 Break-even in units 650 Contribution margin ratio 0.36 Break-even in dollars $ 146,250 Sales $ 315,000 Variable costs $ 203,000 Fixed costs $ 52,000 Net Income $ 60,000
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...
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Straight-Line is a company that does land surveys and engineering consulting. They have an opportunity to purchase new computer equipment that will allow them to render their drawings and surveys much more quickly. The new equipment will cost them an additional $1,200 per month, but they will be able to increase their sales by 10% per year. Their current annual cost and break-even figures are shown below.
What will be the impact on the break-even point if Straight-Line purchases the new computer?
- What will be the impact on net operating income if Straight-Line purchases the new computer?
- What would be your recommendation to Staight-Line regarding this purchase?
| Units sold | 1400 | |
| Sales price per unit | $ 225 | |
| Variable cost per unit | $ 145 | |
| Fixed costs | $ 52,000 | |
| Break-even in units | 650 | |
| Contribution margin ratio | 0.36 | |
| Break-even in dollars | $ 146,250 | |
| Sales | $ 315,000 | |
| Variable costs | $ 203,000 | |
| Fixed costs | $ 52,000 | |
| Net Income | $ 60,000 |
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