Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

A division of Hewlett-Packard Company changed its production operations from one where a large labor force assembled electronic components to an automated production facility dominated by computer-controlled robots. The change was necessary because of fierce competitive pressures.
Improvements in quality, reliability, and flexibility of production schedules were necessary just to match the competition. As a result of the change, variable costs fell and fixed costs increased, as shown in the following assumed budgets:

Old Production Operation New Production Operation
Unit variable cost
Material $ .88 $ .88
Labor 1.22 .22
Total per unit $ 2.10 $ 1.10
Monthly fixed costs
Rent and depreciation $450,000 $ 875,000
Supervisory labor 80,000 175,000
Other 50,000 90,000
Total per month $580,000 $1,140,000

Expected volume is 600,000 units per month, with each unit selling for $3.10. Capacity is 800,000 units.

1. Compute the budgeted profit at the expected volume of 600,000 units under both the old and the new production environments.
2. Compute the budgeted break-even point under both the old and the new production environments.
3. Discuss the effect on profits if volume falls to 500,000 units under both the old and the new production environments.
4. Discuss the effect on profits if volume increases to 700,000 units under both the old and the new production environments.
5. Comment on the riskiness of the new operation versus the old operation.

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M928741

Have any Question? 


Related Questions in Basic Finance

The current balance sheet shows a total common equity of 3

The current balance sheet shows a total common equity of 3 million dollars, the company has 125000 shares outstanding, sell at price 50 dollares per share. How much do the firm's market value and book value differ?

What distinguishes an ordinary annuity from an annuity due

What distinguishes an ordinary annuity from an annuity due? What distinguishes an ordinary annuity from a deferred annuity? If a cash flow is the same amount each period, ad infinitum, how do we value the present value o ...

For each of the following situations determine whether a

For each of the following situations, determine whether a long or short hedge is appropriate. Justify your answers. a. A firm anticipates issuing stock in three months. b. An investor plans to buy a bond in 30 days. c. A ...

In late april 2010 apples stock was selling for more than

In late April 2010, Apple's stock was selling for more than $260 per share. The following appeared in a column in the Wall Street Journal, listing potential problems facing Apple that might cause the price of the firm's ...

1 what do economists mean by the channels of monetary

1. What do economists mean by the channels of monetary policy? 2. What is the interest rate channel? 3. What is the bank lending channel? What key economic fact does this channel focus on? 4. What is the balance sheet ch ...

1 what is noise trading2 what is herd behavior and how can

1. What is noise trading? 2. What is herd behavior, and how can it lead to a bubble in a financial market? 3. Some mutual funds have started behavioral finance funds that attempt to use insights from behavioral finance i ...

In 2009 daryl bought a life insurance policy on his life

In 2009, Daryl bought a life insurance policy on his life with a death benefit of $200,000. He named his wife Melanie the beneficiary of this policy. In 2012, Daryl created an ILIT with Melanie as beneficiary, and transf ...

1 how many conditions are there in the simplest possible

1. How many conditions are there in the simplest possible experiment? 2. Describe how participants are assigned to conditions in randomized groups, matched-subjects, and repeated measures experimental designs. 3. What ar ...

Cost of debt sincere stationery corporation needs to raise

(Cost of debt) Sincere Stationery Corporation needs to raise $450,000 to improve its manufacturing plant. It has decided to issue a $1,000 par value bond with an annual coupon rate of 18 percent and a maturity of 12 year ...

1 explain how the gold standard worked and why it led to

1. Explain how the gold standard worked and why it led to stable exchange rates. What might be some advantages and disadvantages of returning to the gold standard? 2. Describe the relationship between purchasing power pa ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen