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vazorg [7]
2 years ago
5

Senate Inc. is considering two alternative methods for producing playing cards. Method 1 involves using a machine with a fixed c

ost (mainly depreciation) of $17,000 and variable costs of $1.00 per deck of cards. Method 2 would use a less expensive machine with a fixed cost of only $5,000, but it would require a variable cost of $1.50 per deck. The sales price per deck would be the same under each method. At what unit output level would the two methods provide the same operating income (EBIT)?
Business
1 answer:
photoshop1234 [79]2 years ago
4 0

Answer:

24,000 units

Explanation:

We know,

According to the contribution margin approach,

Operating Income (EBIT) = Sales - Variable cost - Fixed cost

or, EBIT = (Price x Quantity) - (Quantity x VC per unit) - Fixed cost

As there are two methods,

Method 1, Variable cost = $1.00/unit, Fixed cost = $17,000

Method 2, Variable cost = $1.50/unit, Fixed cost = $5,000

According to the Question, as both methods will yield same EBIT at the same output levels,

Method 1 EBIT = Method 2 EBIT

or,  (Price x Quantity) - (Quantity x $1.00) - 17,000 = (Price x Quantity) - (Quantity x $1.50) - $5,000

or, (Quantity x $1.50) - (Quantity x $1.00) = $(17,000 - 5,000) [Deducted (price x quantity from both the sides]

or, $0.50 x Quantity = $12,000

or, Quantity = $12,000/$0.50

Hence, Quantity = 24,000 units

At 24,000 output level, the EBIT of both methods will be same.

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Answer:

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5 0
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4 0
3 years ago
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare
Mamont248 [21]

Answer:

The correct answer is (A) output will be too small and its price too high.

Explanation:

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3 0
3 years ago
Most managers get very little uninterrupted time to work on their priority tasks.
Pavlova-9 [17]
True.

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8 0
3 years ago
Read 2 more answers
interest rate is 7% and doubling time is 10.2 years. you have invested $5,000.00. in how many years will your money $40.000.00?
LenKa [72]
A = P (1 + I)^n
40000 = 5000 (1 + 0.07)^n
(1.07)^n = 40000/5000 = 8
ln(1.07)^n = ln8
nln1.07 = ln8
n = ln8/ln1.07 = 30.7...
The best answer is closest to (d) 30.6 years.
6 0
3 years ago
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