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When the Weidkamp Company's plant is completely idle, fixed costs amount to $720,000. When the plant operates at levels of 50% of capacity or less,
When the Weidkamp Company's plant is completely idle, fixed costs amount to $720,000. When the plant operates at levels of 50% of capacity or less, its fixed costs are $840,000; at levels more than 50% of capacity, its fixed costs are $1,200,000. The company's variable costs at full capacity (100,000 units) amount to $1,800,000.
- Assuming that the company's product sells for $60 per unit, what is the company's break-even point in sales dollars?
- Using only the data given, at what level of sales would it be more economical to close the factory than to operate it? In other words, at what level would operating losses approximate the losses incurred if the factory closed down completely?
- Assume that Weidkamp Company is operating at 50% of its capacity and decides to reduce the selling price from $60 per unit to $36 per unit to increase sales. At what percentage of capacity must the company operate to break even at the reduced sales price?
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