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The management of Bernard Ltd thinks that their new product will sell at 30 per unit. Existing capacity is fully utilised, so plant, with a
The management of Bernard Ltd thinks that their new product will sell at 30 per unit. Existing capacity is fully utilised, so plant, with a useful life of 10 years, would have to be purchased. The expected costs are as follows.
Raw material cost per unit | 8 |
Labour cost per unit | 5 |
Other unit variable costs | 5 |
Fixed costs excluding depreciation | 12,000 |
Purchase price of plant | 50,000 |
Required:
Report the profit generated by the new product if annual sales were a) 2,000 units; b) 4,000 units.
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