ABC Ltd. Manufactures cooking pots. The companys best selling pot Sells for $250. The variable...
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Accounting
ABC Ltd. Manufactures cooking pots. The companys best selling pot
Sells for $250. The variable costs amount to $160 per pot. The results for the last year were:
Sales (4,500 pots) $1,125,000
Variable expenses 720,000
Contribution 405,000
Fixed expenses 360,000
Net income $45,000
Compute the numbers of pots the firm must sell to break even
The company is considering a change in its production process. The new process would reduce variable cost per pot by 20%, but fixed costs would increase by $250,000.
Prepare a contribution statement assuming the new process is implemented, the firm continues to sell the same number of pots and selling price remains constant.
Should the company introduce the new production process? Justify your response.
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