Houston-based Advanced Electronics manufactures audio speakers for desktop computers. The following

data relate to the period just ended when the company produced and sold 42,000 speaker sets:

Sales ......................................................................................................................................................... $3,360,000

Variable costs ............................................................................................................................................ 840,000

Fixed costs ................................................................................................................................................ 2,280,000

Management is considering relocating its manufacturing facilities to northern Mexico to reduce costs.

Variable costs are expected to average $18 per set; annual fixed costs are anticipated to be $1,984,000.

(In the following requirements, ignore income taxes.)

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Problem 7