Question

The cost structure of two firms competing in the same industry is represented by the following cost formulas: Company X = $1,420,000 + $34/ unit; Company Z = $860,000 + $66/unit. The selling price is $120 per unit for both companies.

Required:
Calculate the indifference point between the two cost structures, that is, the amount of unit sales that produce exactly the same operating income for Company X and Company Z. If sales volume were expected to increase by 25% over the next two years, which cost structure would you prefer? Why?



$1.99
Sales2
Views334
Comments0
  • CreatedOctober 05, 2013
  • Files Included
Post your question
5000