Payne Company sells shoes which are made in the USA. Current data per month is as follows:

Selling Price $80.00

Variable Cost Per Unit $50.00

Monthly Fixed Costs $120,000

Units Sold 7,500

Payne has the opportunity to shift production overseas. The overseas manufacturer would charge a monthly fee of $300,000 to make all of the shoes, thus eliminating all of the variable costs.

Required

• Calculate the net income and the break-even in units using the current data.
• Calculate the net income and the break-even in units assuming Payne shifts production overseas.
• Should Payne shift production overseas? Explain your answer using numbers from your calculations. In addition to your calculations, what else could be considered when making this decision?

	Current	Shift Production
Net Income
Break-Even in Units

Conclusion