Example 1 A company is manufacturing 1,000 units of a product. The present costs and sales...

 

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Example 1 A company is manufacturing 1,000 units of a product. The present costs and sales data are as follows: Selling price per unit N$ 10 Variable cost per unit N$ 5 Fixed costs N$4,000 The management is considering the following two alternatives: i. To accept an export order for another 200 units at N$8 per unit. The expenditure of the export order will increase the fixed costs by N$500. ii. To reduce the production from present 1,000 units to 600 units and buy another 400 units from the market at $6 per unit. This will result in reducing the present fixed costs from N$4,000 to N$3,000. Which alternative the management should accept? Example 1 A company is manufacturing 1,000 units of a product. The present costs and sales data are as follows: Selling price per unit N$ 10 Variable cost per unit N$ 5 Fixed costs N$4,000 The management is considering the following two alternatives: i. To accept an export order for another 200 units at N$8 per unit. The expenditure of the export order will increase the fixed costs by N$500. ii. To reduce the production from present 1,000 units to 600 units and buy another 400 units from the market at $6 per unit. This will result in reducing the present fixed costs from N$4,000 to N$3,000. Which alternative the management should accept?

Answer rating: 100% (QA)

The management will choose that alternative over which net income is higher The calculation of t... View the full answer