In a marginal/differential analysis, I have two decision optionsavailable for the upcoming year:1. Keep...In...

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Accounting

In a marginal/differential analysis, I have two decision optionsavailable for the upcoming year:
1. Keep open my existing arcade business only and not expand, or2. expand business by opening a second location across town
If opened, the second locaiton's staff wages would be the samepercentage of sales as the original location. The opening of thesecond location is estimated to result in a 15% increase in salesfor the original location.
Question...
I have calculated the breakeven point (in units). If I multiplythe breakeven by the price per unit, is that number supposed tocover my variable expenses, or my fixed expenses? How do I use thatbreakeven info. to determine if the decision to expand is good ornot?

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SolutionIf I multiply the breakevenby the price per unit is that number supposed to cover my variableexpenses or my fixed expensesIf you multipy beakeven by the priceper unit than resulted amount will cover both See Answer

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In: AccountingIn a marginal/differential analysis, I have two decision optionsavailable for the upcoming year:1. Keep...In a marginal/differential analysis, I have two decision optionsavailable for the upcoming year:1. Keep open my existing arcade business only and not expand, or2. expand business by opening a second location across townIf opened, the second locaiton's staff wages would be the samepercentage of sales as the original location. The opening of thesecond location is estimated to result in a 15% increase in salesfor the original location.Question...I have calculated the breakeven point (in units). If I multiplythe breakeven by the price per unit, is that number supposed tocover my variable expenses, or my fixed expenses? How do I use thatbreakeven info. to determine if the decision to expand is good ornot?