Question: I.Explain the relationship between the degree off operating leverage and cost structure of a company. II. The cost to produce paper liners for the company;
I.Explain the relationship between the degree off operating leverage and cost structure of a company.
II. The cost to produce paper liners for the company;
Total Cost
(25,000 liners)
D. materials$40,000
D. labor$20,000
Variable overhead$15,000
Fixed overhead$50,000
Total manufacturing cost$125,000
Cost per liner ($125,000 / 25,000)50 per unit
A company from the outside offers to sell the liners for only $ 40 per unit. By purchasing the liners from outside of the company, our company can avoid all variable manufacturing costs and reduce our fixed overhead cost by $30,000. Under the assumption of this information, should our company continue to make liners or buy them from outside?
III. Camera sales price 290 and to produce 10,000 units per year, 2,500,000 investments are needed. Company desires 15% of ROI. Selling and administration expenses associated by camera 750,000. What will be the target cost to produce this product?
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