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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;1.;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.;2.;Determine the break-even point in speaker sets if operations are shifted to Mexico.;3.;Assume that management desires to achieve the Mexican break-even point, however, operations;will remain in the United States.;a.;If variable costs remain constant, what must management do to fixed costs? By how much;must fixed costs change?;b.;If fixed costs remain constant, what must management do to the variable cost per unit? By;how much must unit variable cost change?;4.;Determine the impact (increase, decrease, or no effect) of the following operating changes.;a.;Effect of an increase in direct material costs on the break-even point.;b.;Effect of an increase in fixed administrative costs on the unit contribution margin.;c.;Effect of an increase in the unit contribution margin on net income.;d.;Effect of a decrease in the number of units sold on the break-even point.

 

Paper#75118 | Written in 18-Jul-2015

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