Question
A companymanufactures a product that sells for $25 per unit. At present, the product is manufactured in a factory that mostly uses direct labor workers.
A companymanufactures a product that sells for $25 per unit. At present, the product is manufactured in a factory that mostly uses direct labor workers. The variable expenses are $15 per unit and the direct labor cost makes up 60% of variable expenses.
Last year, that company sold 62,000 units of its product and gave the following results
Sales (62,000 balls) $1,550,000
Variable expenses 930,000
Contribution margin 620,000
Fixed expenses 426,000
Net operating income $194,000
This same company considers buildinga new and high-tech factory. The new factory would reducevariable expenses per unit by 40%, but would double the company's fixed expenses per year due to investment in fixed assets.
if the new factory is built, how many units will the company have to sell next year to earn the same net operating income, $194,000, as last year?
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