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Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 45,000
Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 45,000 speaker sets:
Sales | $ | 3,780,000 | |
Variable costs | 945,000 | ||
Fixed costs | 2,250,000 | ||
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $16.00 per set; annual fixed costs are anticipated to be $1,994,000. (In the following requirements, ignore income taxes.)
Required:
- Calculate the companys current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.
- Determine the break-even point in speaker sets if operations are shifted to Mexico.
- Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.
- If variable costs remain constant, by how much must fixed costs change?
- If fixed costs remain constant, by how much must unit variable cost change?
- Determine the impact (increase, decrease, or no effect) of the following operating changes.
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