Question
Jax has accumulated the following cost data for the burritos that they produce. Month Production Total Cost January 10,000 $136,000 February 12,000 $140,000 March 14,000
Jax has accumulated the following cost data for the burritos that they produce.
Month Production Total Cost
January 10,000 $136,000 February 12,000 $140,000 March 14,000 $149,000 April 16,000 $157,000 May 14,000 $150,000 June 15,000 $152,500 July 8,000 $125,000 August 9,000 $132,000 September 12,000 $140,000 October 14,000 $150,000 November 10,000 $137,000 December 9,000 $130,000
a. Use the high-low method and compute the cost equation for the production of this product.
b. Assume that the product sells for $10.00. How many units of the product must the company sell to break even (round up to the nearest whole unit)?
c. An engineer has suggested that a $12,000 addition be made to fixed costs (modification of one of the tools on the assembly line) which will reduce direct labor cost by $0.75 per unit. The company is current selling 25,000 units of this product. Should the company make the change? Why or why not?
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