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Self-check questions 7.3 Q1. A retail store expects to sell 8,000 units of...

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Accounting

Self-check questions 7.3
Q1. A retail store expects to sell 8,000 units of its product each year at a price of 4 a unit, a variable cost of 2 a unit and fixed costs of 15,000. New technology reduces variable Jcosts to 1.50 a unit of sales, but raises fixed costs to 20,000. Budgeted output remains T.?N unchanged at 8,000 units per year and price unchanged at 4 a unit.
(a) Draw a break-even chart to compare the situation before and after technical change. Which break-even solution might the retail store prefer? Explain your reasoning.
(b) Consider the assumptions and limitations of your analysis.
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