Question
Production machinery with a maximum capacity of 50,000 units per year, generates fixed costs of S /. 400,000.00 / year. Variable costs per unit add
Production machinery with a maximum capacity of 50,000 units per year, generates fixed costs of S /. 400,000.00 / year. Variable costs per unit add up to S /. 40.00 The product manufactured in this equipment is sold for S /. 55.00. The employer estimates that the equipment utilization rate will be 80% for next year. The company could meet an additional order of 5,000 units as long as it agrees to reduce the price to S /. 45.00 per unit. The additional order would void the Fixed Costs.
1. Calculate total costs, revenue, and profit without considering the additional order.
2. Check if it is appropriate to accept the additional order.
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