Houston-based Advanced Electronics manufactures audio speakersfor desktop computers. The following data relate to the period justended when the company produced and sold 43,000 speaker sets:
| | | |
| Sales | $ | 3,526,000 | |
| Variable costs | | 881,500 | |
| Fixed costs | | 2,310,000 | |
|
Management is considering relocating its manufacturingfacilities to northern Mexico to reduce costs. Variable costs areexpected to average $18.00 per set; annual fixed costs areanticipated to be $1,988,000. (In the following requirements,ignore income taxes.)
Required:
- Calculate the company’s current income and determine the levelof dollar sales needed to double that figure, assuming thatmanufacturing operations remain in the United States.
- Determine the break-even point in speaker sets if operationsare shifted to Mexico.
- Assume that management desires to achieve the Mexicanbreak-even point; however, operations will remain in the UnitedStates.
- If variable costs remain constant, by how much must fixed costschange?
- If fixed costs remain constant, by how much must unit variablecost change?
- Determine the impact (increase, decrease, or no effect) of thefollowing operating changes.
