Thunder Hollow Inc. makes and sells hood ornaments for $118 each. The company is considering upgrading...
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Thunder Hollow Inc. makes and sells hood ornaments for $118 each. The company is considering upgrading its machinery, which would increase its fixed costs to a total of $28,000. However, the new machinery is more efficient and would lower variable costs from $75 to $40 per unit. If Thunder Hollow believes it is equally likely that they will sell 4,000 to 8,000 ornaments next year, then what is the operating leverage for the new machinery? (round to the nearest thousandth, e.g., 85.6% would be 0.856). Thunder Hollow Inc. makes and sells hood ornaments for $118 each. The company is considering upgrading its machinery, which would increase its fixed costs to a total of $28,000. However, the new machinery is more efficient and would lower variable costs from $75 to $40 per unit. If Thunder Hollow believes it is equally likely that they will sell 4,000 to 8,000 ornaments next year, then what is the operating leverage for the new machinery? (round to the nearest thousandth, e.g., 85.6% would be 0.856).
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Operating leverage measures the sensitivity of a companys operating income to changes in sales volum... View the full answer
Related Book For
Managing Operations Across the Supply Chain
ISBN: 978-0078024030
2nd edition
Authors: Morgan Swink, Steven Melnyk, Bixby Cooper, Janet Hartley
Posted Date:
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