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Papessa [141]
3 years ago
7

Spencer Tools would like to offer a special product to its best customers. However, the firm wants to limit its maximum potentia

l loss on this product to the firm's initial investment in the project. The fixed costs are estimated at $32,000, the depreciation expense is $9,700, and the contribution margin per unit is $9.85. What is the minimum number of units the firm should pre-sell to ensure its potential loss does not exceed the desired level?
Business
1 answer:
saveliy_v [14]3 years ago
5 0

Answer:

hence we say that minimum number of units to ensure its potential loss does not exceed the desired level is 3249 unit

Explanation:

Given data

fixed costs = $32000

depreciation = $9700

contribution margin = $9.85 per unit

to find out

minimum number of units

solution

we first find the break point so

break point = Fixed cost / contribution

put all these value

break point = 32000 / 9.85

break point is 3248.73

approx = 3249 unit

so hence we say that minimum number of units to ensure its potential loss does not exceed the desired level is 3249 unit

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