Suppose ABC Company's current cost structure comprises xed costs of $36,000 per month and the...
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Suppose ABC Company's current cost structure comprises xed costs of $36,000 per month and the variable cost ratio is 60 percent. If the rm invests in some additional machines, fixed costs would increase to $60,000 per month but the variable cost ratio would decrease to 40 percent. 1. Which cost structure would you recommend if monthly revenue is $95,000? 2. Which cost structure would you recommend if monthly revenue is $150,000? 3. Calculate the sales level at which the firm is indifferent (i.e., has the same profit) under both cost structures. Hint For parts 1 and 2, calculate the prots at different levels and compare the two cost structures. One way to approach the last part is to let the indifference point be $R in terms of sales revenue. Equate the profits under the two cost structures at this level, and solve for R. If you'd like to skip for now: Please enter \"skip\" or \"later" in the "Submit Answer" box and proceed
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