Question

For a table manufacturing company, selling price for a table is $191.00 per Unit, Variable cost is $28.00 per Unit, rent is $4,281.00 per month and insurance is $223.00 per month. Company wants to expand its business and improve the table quality, it wants to increase the selling price for a table to $291.00 per Unit, Variable cost to $47.00 per Unit, bigger area will have rent $5,219.00 per month and insurance is $335.00 per month At what point will the company be indifferent between the current mode of operation and the new option?

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Answer #1

Indifference point:

= Difference in fixed costs/Difference in variable cost per unit

= ($5,219+$335-$4,281-$223)/($47-$28)

= $1,050/$19

= 55.26 or 55 units

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