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Birch Company normally produces and sells 4 5 , 0 0 0 units of RG - 6 each month. The selling price is $ 2
Birch Company normally produces and sells units of RG each month. The selling price is $ per unit, variable costs are $ per unit, fixed manufacturing overhead costs total $ per month, and fixed selling costs total $ per month.
Employmentcontract strikes in the companies that purchase the bulk of the RG units have caused Birch Company's sales to temporarily drop to only units per month. Birch Company estimates the strikes will last for two months, after which time sales of RG should return to normal. Due to the current low level of sales, Birch Company is thinking about closing its own plant during the strike, which would reduce fixed manufacturing overhead costs by $ per month and fixed selling costs by Startup costs at the end of the shutdown would total $ Because Birch Company uses Lean Production methods, no inventories are on hand.
Required:
What is the financial advantage disadvantage if Birch closes its own plant for two months?
Should Birch close the plant for two months?
At what level of unit sales for the twomonth period would Birch Company be indifferent between closing the plant or keeping it open?
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What is the financial advantage disadvantage if Birch closes its own plant for two months?
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