Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I. The capacity of the company is 70.000 units of electrical toys and can sell only 50.000 units for 50$ each. Fixed costs are

image

I. The capacity of the company is 70.000 units of electrical toys and can sell only 50.000 units for 50$ each. Fixed costs are 720.000$ and CMR 36%. New market research shows that decreasing the sale price 4$, the sale quantity will lead to an increase of 14.000 units. a. Discuss the decrease in the sale price based on financial reasons. b. Another suggestion to business management is to make 400.000$ investment to increase the capacity to 90.000 units. Such investment will increase the initial CMR to 50%. Discuss the investment suggestion with financial reasons.

Step by Step Solution

3.48 Rating (161 Votes )

There are 3 Steps involved in it

Step: 1

a Discussion on Decreasing the Sale Price Currently the company sells 50000 units at a price of 50 each generating a total revenue of 50000 50 2500000 ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management and Cost Accounting

Authors: Colin Drury

8th edition

978-1408041802, 1408041804, 978-1408048566, 1408048566, 978-1408093887

More Books

Students also viewed these Accounting questions

Question

What is Larmors formula? Explain with a suitable example.

Answered: 1 week ago