Your company plans to produce a new product, a wireless computer mouse. Two machines can be...
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Your company plans to produce a new product, a wireless computer mouse. Two machines can be used to make the mouse, Machines A and B. The price per mouse will be $26.00 regardless of which machine is used. The fixed and variable costs associated with the two machines are shown below. At the expected sales level of 70,000 units, how much higher or lower will the firm's expected EBIT be if it uses Machine B with high fixed costs rather than Machine A with low fixed costs, i.e., what is EBITB -EBITA? Price per mouse (P) Fixed costs (F) Variable cost/unit (V) Exp. unit sales (Q) Machine A $26.00 $100,000 $16.00 70,000 Machine B $26.00 $400,000 $7.00 70,000 Your company plans to produce a new product, a wireless computer mouse. Two machines can be used to make the mouse, Machines A and B. The price per mouse will be $26.00 regardless of which machine is used. The fixed and variable costs associated with the two machines are shown below. At the expected sales level of 70,000 units, how much higher or lower will the firm's expected EBIT be if it uses Machine B with high fixed costs rather than Machine A with low fixed costs, i.e., what is EBITB -EBITA? Price per mouse (P) Fixed costs (F) Variable cost/unit (V) Exp. unit sales (Q) Machine A $26.00 $100,000 $16.00 70,000 Machine B $26.00 $400,000 $7.00 70,000
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To calculate the expected EBIT Earnings Before Interest and Taxes for each machine we need to consid... View the full answer
Related Book For
Managerial Accounting
ISBN: 9780073526706
12th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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