Question
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. e) Selling price per unit........ $50.00 Production Costs: Direct Materials. $10.00 Direct Labour $8.00 Variable Manufacturing Overhead $7.00 Fixed Manufacturing Overhead....... $450,000 Fixed Selling & Administrative Expenses... $300,000 Variable selling expense per unit $10.00 The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that Greek is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss? (1% marks)
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