1. Compute Jupiter’s new break-even point if the proposed automated equipment is installed.(in units)
2. Determine how many units Jupiter will have to sell to show a profit of $140,000, assuming the new technology is adopted.
Present | New equipment | ||
Units sold (A) | 25000 | ||
Selling price p.u (B) | 25 | 26 | |
Sales (A*B) | 625000 | ||
Total variable cost (D) | 375000 | ||
Thus, Variable cost p.u E = (D/A) | 15 | 12 | |
Contribution p.u (B-E) | 10 | 14 | |
Setup costs | 16000 | 15000 | |
Inspection | 30000 | 4500 | |
Engineering | 12500 | 22400 | |
Gen factory overhead | 61500 | 166100 | |
Fixed selling & admin costs | 30000 | 30000 | |
Total fixed costs | 150000 | 238000 |
1. Break even point = Total fixed cost / Contribution p.u = 238000/14 = 17,000 units
2.
Required profit (A) | 140000 |
Fixed costs (B) | 238000 |
Thus, required contribution (A+B) | 378000 |
Contribution p.u | 14 |
Thus, required units = (378000/14) | 27000 |
1. Compute Jupiter’s new break-even point if the proposed automated equipment is installed.(in units) 2. Determine how...
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