Question
Steve Corp. manufactures Girds which have a sales price of $5 a unit. Unit manufacturing costs include: direct materials $2, direct labor $1.5, and $.30
Steve Corp. manufactures Girds which have a sales price of $5 a unit. Unit manufacturing costs include: direct materials $2, direct labor $1.5, and $.30 for variable overhead. Fixed manufacturing costs total $150,000 or $.30 per budgeted unit. The VP of Sales and Marketing has proposed a product improvement which will add $.50 to the material cost of each unit, as well as additional machinery that will increase depreciation by $100,000 per year. He is confident this improvement will allow him to increase the sales price by $.75 and increase total sales volume by 10,000 units. a. What are current breakeven unit sales and dollars b. What are the proposed breakeven unit sales and dollars c. What is the profit impact of the proposed change
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