Question: Given: OLD TECHNOLOGY: 3800 units at $800 Variable cost $480 per unit=480x3800=1,824,000 Annual fixed cost 1,120,000 Revenue 3,040,000 Net Opportunity Income NOI 96,000 Total cost
Given:
OLD TECHNOLOGY:
3800 units at $800
Variable cost $480 per unit=480x3800=1,824,000
Annual fixed cost 1,120,000
Revenue 3,040,000
Net Opportunity Income NOI 96,000
Total cost 2,944,000
Break-even point 3500 units=fixed cost/(sale price per unit-variable cost x unit)=1120000/320=3500
DOL= (sales-variable costs)/(sales-variable cost-fixed costs)
(3040000-1824000)/( 3040000-1824000-1120000)=1.216.00/96000=12.67
NEW TECHNOLOGY
5000 units at $800
Variable costs $240 x units=$240x5000=1,200,000
Annual Fixed costs $2240,000
Revenue 4,000,000
Net Opportunity Income (NOI) $560.000
Total cost 3,440,000
DOL= (sales-variable costs)/(sales-variable cost-fixed costs)
4000000-1200000/(4000000-1200000-2240000)=2800000/560000=5
Break-even point 224000000/800-240=4000
- Create a graph illustrating the company's total revenue curve and the two total cost curves (old technology and new technology). Identify the two breakeven sales levels on the graph.
- Calculate the sales volume at which NOI for the company is the same under both production methods and show that sales level on the graph.
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