Question
Aldridge, Inc. produces and sells a single product.Unit costs for direct materials and direct labor are $24 and $36, respectively.In March, 20,000 units were produced,
Aldridge, Inc. produces and sells a single product.Unit costs for direct materials and direct labor are $24 and $36, respectively.In March, 20,000 units were produced, and total overhead was $214,000. In April, 26,000 units were produced, and total overhead was $259,000.Selling price of the unit is $100.
a.Estimate the total fixed overhead costs of the company. (use the high-low method)
b.Compute the contribution margin ratio.
c.Compute the company's break-even point in sales dollars.
d.Compute the number of units which must be sold to have income before tax of $122,000.
e. Leasing a new machine would reduce variable costs by $6 per unit but increase fixed overhead by $100,000 per month.If Aldridge expects to produce and sell 30,000 units per month for the foreseeable future, should they lease the new machine? Why?
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