Question
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.15. The machine will increase fixed costs by $19,000 per year. The information they will use to consider these changes is shown here.
A. What will the impact be on the break-even point if Flanders purchases the new machinery? Round per unit cost answers to two decimal places.
| Current | New Machine | |
| Units Sold | 216,000 | fill in the blank 1 |
| Sales Price Per Unit | $2.10 | $fill in the blank 2 |
| Variable Cost Per Unit | $1.75 | $fill in the blank 3 |
| Contribution Margin Per Unit | $0.35 | $fill in the blank 4 |
| Fixed Costs | $49,000 | $fill in the blank 5 |
| Break-Even (in units) | 140,000 | fill in the blank 6 |
| Break-Even (in dollars) | $294,000 | $fill in the blank 7 |
B. What will the impact be on net operating income if Flanders purchases the new machinery?
| Current | New Machine | |
| Sales | $453,600 | $fill in the blank 8 |
| Variable Costs | 378,000 | fill in the blank 9 |
| Contribution Margin | $75,600 | $fill in the blank 10 |
| Fixed Costs | 49,000 | fill in the blank 11 |
| Net Income (Loss) | $26,600 | $fill in the blank 12 |
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Contemporary Engineering Economics
Authors: Chan S. Park
5th edition
136118488, 978-8120342095, 8120342097, 978-0136118480
