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Maryland Manufacturing ( M 2 ) produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts.
Maryland Manufacturing M produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first unitrate lease is one where M would pay $ per unit produced, regardless of the number of units. The second lease option flatrate lease is one where M would pay $ annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same.
M sells the part for $ per unit and unit variable cost excluding any machine lease costs are $ Annual fixed costs excluding any machine lease costs are $
Required:
What is the annual breakeven level assuming
The unitrate lease?
The flatrate lease?
At what annual volume would the operating profit be the same regardless of the royalty option chosen?
Suppose M is unsure of the pricing and costs for the part other than the costs of the lease under the two payment options At what annual volume would the operating profit be the same regardless of the lease payment option chosen?
Assume an annual volume of parts. What is the operating leverage assuming
The unitrate lease?
The flatrate lease?
Assume an annual volume of parts. What is the margin of safety assuming
The unitrate lease?
The flatrate lease?Maryland Manufacturing M produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first unitrate lease is one where M would pay $ per unit produced, regardless of the number of units. The second lease option flatrate lease is one where M would pay $ annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same.
M sells the part for $ per unit and unit variable cost excluding any machine lease costs are $ Annual fixed costs excluding any machine lease costs are $
Required:
What is the annual breakeven level assuming
The unitrate lease?
The flatrate lease?
At what annual volume would the operating profit be the same regardless of the royalty option chosen?
Suppose M is unsure of the pricing and costs for the part other than the costs of the lease under the two payment options At what annual volume would the operating profit be the same regardless of the lease payment option chosen?
Assume an annual volume of parts. What is the operating leverage assuming
The unitrate lease?
The flatrate lease?
Assume an annual volume of parts. What is the margin of safety assuming
The unitrate lease?
The flatrate lease?Maryland Manufacturing M produces a part using an expensive proprietary machine that can only be leased. The leasing company offers two contracts. The first unitrate lease is one where M would pay $ per unit produced, regardless of the number of units. The second lease option flatrate lease is one where M would pay $ annually, regardless of the number produced. The lease will run one year and the lease option chosen cannot be changed during the lease. All other lease terms are the same.
M sells the part for $ per unit and unit variable cost excluding any machine lease costs are $ Annual fixed costs excluding any machine lease costs are $
Required:
What is the annual breakeven level assuming
The unitrate lease?
The flatrate lease?
At what annual volume would the operating profit be the same regardless of the royalty option chosen?
Suppose M is unsure of the pricing and costs for the part other than the costs of the lease under the two payment options At what annual volume would the operating profit be the same regardless of the lease payment option chosen?
Assume an annual volume of parts. What is the operating leverage assuming
The unitrate lease?
The flatrate lease?
Assume an annual volume of parts. What is the margin of safety assuming
The unitrate lease?
The flatrate lease?
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