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The company is considering a purchase of equipment that would reduce its direct labor costs by $100,000 and would change its manufacturing overhead costs to
The company is considering a purchase of equipment that would reduce its direct labor costs by $100,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $371,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $250,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and re compute (3) the break-even point in sales dollars. The company is considering a purchase of equipment that would reduce its direct labor costs by $100,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $371,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $250,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and re compute (3) the break-even point in sales dollars
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