Question
. Two Companies are expected to have annual sales of 1 million decks of playing cards for next year. Estimates for the next year are
. Two Companies are expected to have annual sales of 1 million decks of playing cards for next year. Estimates for the next year are as follows: Company 1 Company 2 Selling price $3.00 $3.00 Cost of materials (variable) .75 .80 Labor per Deck (variable) .75 1.25 Variable overhead per deck (variable) .30 .35 Fixed Costs $960,000 $252,000 Required: a. Compute the breakeven point for each Company; b. Which Company, based on your above answer, reaches breakeven soonest? c. Assume Company 2 changes its variable cost per deck to $1.20 for materials, its fixed costs to $195,000, all other costs remaining the same. Assume it increases its sales price to $4.00. If it then sells 129,000 decks of cards, what will its profit/loss be?
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