Question
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.10. The machine will increase fixed costs by
Flanders Manufacturing is considering purchasing a new machine that will reduce variable costs per part produced by $0.10. The machine will increase fixed costs by $12,800 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 | 217,000 | |
| Sales Price Per Unit | $2.15 | $ |
| Variable Cost Per Unit | $1.70 | $ |
| Contribution Margin Per Unit | $0.45 | $ |
| Fixed Costs | $67,500 | $ |
| Break-Even (in units) | 150,000 | |
| Break-Even (in dollars) | $322,500 | $ |
B. What will the impact be on net operating income if Flanders purchases the new machinery?
| Current | New Machine | |
| Sales | $466,550 | $ |
| Variable Costs | 368,900 | |
| Contribution Margin | $97,650 | $ |
| Fixed Costs | 67,500 | |
| Net Income (Loss) | $30,150 | $ |
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Accounting for Governmental and Nonprofit Entities
Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely
18th edition
1260190080, 1260190083, 978-1259917059
