Question
Carla Vista Light Bulbs management anticipates selling 3,000 light bulbs this year at a price of $16 per bulb. It costs Carla Vista $11 in
Carla Vista Light Bulbs management anticipates selling 3,000 light bulbs this year at a price of $16 per bulb. It costs Carla Vista $11 in variable costs to produce each light bulb, and the fixed costs for the firm are $10,000. Carla Vista has an opportunity to sell an additional 1,000 bulbs next year at the same price and variable cost, but by doing so the firm will incur an additional fixed cost of $2,000. Should Carla Vista produce and sell the additional bulbs? (If an amount reduces the account balance then enter with negative sign, e.g. -125.)
The additional sales would change Carla Vistas EBIT by $ and therefore Carla Vista should not OR should produce and sell the additional bulbs.
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