Question
Mace Windu owns and operates The Force Company a light sabre producing company. He is considering the introduction of a new custom light sabre that
Mace Windu owns and operates The Force Company a light sabre producing company. He is considering the introduction of a new custom light sabre that he estimates will generate demand for 8,000 light sabers. The sabers will sell for $100.00 each, with a unit variable cost of $40.00, and annual fixed costs of $600,000. Required: 1. Determine the number of sabers to be sold to break-even. 2. Determine the number of sabers to be sold to earn an operating profit of $22,000. 3. What is the safety margin in units when the company makes an operating profit of $22,000? 4. If 8,600 sabers are sold, determine the operating income. 5. If sales price was increased by 15 percent, variable cost per unit increased by 10 percent, and fixed cost increased by $6,000, determine the new break-even point.
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