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Hess Company manufactures a product that sells for $12 per unit. Total fixed costs are $96,000 and variable costs are $7 per unit. Hess can buy a newer production machine that will increase total fixed costs by $22,800 but variable costs will be decreased by $0.40 per unit.

Required:

a. What is the current breakeven point in units before the newer machine is purchased?

b. What effect would the purchase of the new machine have on Hess's break-even point in units?

c. Suppose the newer machine is bought and the company wishes to make a net income of $12,000, how much is sales dollars will have to be sold to achieve that goal?

d. find out the margin of safety at the level of sales in part c above and the newer production machine is purchased.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M985771

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