Sockerville machine shop fabricates polished steel casings. They currently sell 27,000 casings at a selling price...

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Question

Accounting

Sockerville machine shop fabricates polished steel casings. Theycurrently sell 27,000 casings at a selling price of $70. They havethe following cost structure:
Variable costs per unit
$45
Fixed costs
$210,000
Answer and Show Work:
What is the breakeven point in units?
Break-even point in units:
Suppose that if they decrease their price to $65, they couldincrease sales to 32,000 units. What would the change in profit beif they decrease their price to $65?
Change in profit if price is $65
(be sure to say whether profit increases or decreases):
What is the minimum price that Sockerville would be willing tocharge in order to achieve an increase in sales to 32,000 units(round to the nearest cent)?
Minimum price for increase to 32,000 units:
Suppose that Sockerville can purchase a machine that wouldincrease fixed costs to $300,000 and decrease unit variable coststo $30 per unit. At what level of production and sales wouldSockerville be indifferent between the old machine and the newmachine?
Level of production and sales (in units):

Answer & Explanation Solved by verified expert

3.6 Ratings (355 Votes)

Solution a Breakeven point in units Fixed costs Contribution margin per unit 210000 70 45 8400 units Solution b Current profit 2700025 210000 465000 If selling price reduced to 65 then revised See Answer

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