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 following excerpts are taken from dividend policy

The following excerpts are taken from "Dividend Policy Determinants: An Investigation of the Influences of Stakeholder Theory" by Mark E. Holder, Frederick W. Langrehr, and J. Lawrence Hexter, published in the Autumn 199 ...

If the binomial model produces a call option price that is

If the binomial model produces a call option price that is higher than the price at which the option is trading in the market, what strategy is suggested? Discuss how a binomial model accommodates the possibility of earl ...

Consider a borrowing arrangement in which the annual

Consider a borrowing arrangement in which the annual percentage rate (APR) is 8%. a. Under what conditions does the effective annual rate of interest (EAR) differ from the APR of 8%? b. As the frequency of compounding in ...

Consider a borrowing arrangement in which the annual

Consider a borrowing arrangement in which the annual percentage rate (APR) is 8%. a. Under what conditions does the effective annual rate of interest (EAR) differ from the APR of 8%? b. As the frequency of compounding in ...

As a percentage of yield whats the minimum and maximum

As a percentage of yield what's the minimum and maximum tensile stress to be seen by a production quantity of these bolts? With the estimated minimum in-service tensile stress in mind, what possible bolt or joint failure ...

1 what is the difference between adaptive expectations and

1. What is the difference between adaptive expectations and rational expectations? 2. What is the efficient markets hypothesis? 3. According to the efficient markets hypothesis, are stock prices predictable? What is a ra ...

Figure 942 is one depth-first presentation of the ow graph

Figure 9.42 is one depth-first presentation of the ow graph of Fig. 9.38. How many other depth-first presentations of this ow graph are there? Remember, order of children matters in distinguishing depth-first presentatio ...

1 can there be a difference between profit maximization and

1. Can there be a difference between profit maximization and shareholder wealth maximization? If so, what could cause this difference? Which of the two should be the goal of the firm and its management? Why? 2. Define a ...

If you receive 15000 today and can invest it at a 5 annual

If you receive $15,000 today and can invest it at a 5% annual rate compounded continuously, what will be your ending value after 20 years?

If a hospital were to receive 4000 per year in payments at

If a hospital were to receive $4,000 per year in payments at the end of each year for the next 12 years from an uninsured patient who underwent an expensive operation. What would be the current value of these collection ...

  • 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

WalMart Identification of theory and critical discussion

Drawing on the prescribed text and/or relevant academic literature, produce a paper which discusses the nature of group

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