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Luvmatics plans to produce a new product. Three different models are planned: the Regular, Large, and Jumbo. The fixed costs depend on which of two
Luvmatics plans to produce a new product. Three different models are planned: the Regular, Large, and Jumbo. The fixed costs depend on which of two locations are used; in San Francisco the fixed costs would be $2.5 million per year, but in Tuttle the fixed costs would be $1.2 million. Sale prices and variable costs for the three models are shown in the table. Table A.1 Variable Cost Sale Price Regular SS/unit S25/unit Model Large $7 unit 541 unit Jumbo $10 unit 568 unit Use the information in Table A.1. Assume the fixed costs and sales price in both locations are constants and the variable costs in San Francisco are as shown in the table. By how much would the variable cost in Tuttle have to rise to give both locations an identical break-even point for the Regular model? $0.40 $5.40 $10.40 $15.40
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