Reference no: EM132817766
Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following data relate to the period just ended when the company produced and sold 44,000 speaker sets:
Sales $ 3,696,000
Variable costs 924,000
Fixed costs 2,310,000
Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs. Variable costs are expected to average $18.00 per set; annual fixed costs are anticipated to be $1,984,000. (In the following requirements, ignore income taxes.)
Required:
Problem 1. Calculate the company's current income and determine the level of dollar sales needed to double that figure, assuming that manufacturing operations remain in the United States.
Problem 2. Determine the break-even point in speaker sets if operations are shifted to Mexico.
Problem 3. Assume that management desires to achieve the Mexican break-even point; however, operations will remain in the United States.
a. If variable costs remain constant, by how much must fixed costs change?
b. If fixed costs remain constant, by how much must unit variable cost change?
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