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18. CVP and Break-Even Analysis LOi, 2, 2 I, 2,3 Lauren Tarson and Michele Progransky opened To Drawer Optical seven years ago with the goal
18. CVP and Break-Even Analysis LOi, 2, 2 I, 2,3 Lauren Tarson and Michele Progransky opened To Drawer Optical seven years ago with the goal of p ducing fashionable and affordable eyewear. Tar and Progransky have been very pleased with their revenue growth. One particular design, available in plastic and metal, has become one of the com best sellers. The following data relate to this design pro- son e companys Plastic Frames Metal Frames Sales price Direct materials Direct labor Variable overhead Budgeted unit sales 60.00 20.00 13.50 6.50 10,000 80.00 18.00 13.50 8.50 30,000 Currently, the company produces exactly as many frames as it can sell. Therefore, it has no opportu- nity to substitute a more expensive frame for a less expensive one. Top Drawer Optical's annual fixed costs are $1.225 million. Required Each of the following is an independent situation. A. Calculate the total number of frames that Top Drawer Optical needs to produce and sell to break even. B. Calculate the total number of frames that Top to Drawer Optical needs to produce and sell break even if budgeted direct material costs for plastic frames decrease by $10 and annual fixed costs increase by $12,500 for depreciation of a new production machine
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