ABC PVC Company case chapter 4

ABC PVC Company - were fixed but output had decreased due to a decrease in demand Year 1 Year 2 Selling price $.32 $.32 Production costs $.25 $.33

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ABC PVC Company case – Chapter 4 ABC PVC Company produces PVC pipes for irrigation. In year 1, the cost of producing a foot of pipe was $.25 and the selling price was $.32 per foot. In year 2, production costs increased to $.33 per foot although the selling price remained $.32 per foot. Material and labor costs were the same for year 1 and year 2. But overhead costs which were $.12 per foot in year 1 had increased to $.20 per foot in year 2. The problem is that most of the overhead costs
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Unformatted text preview: were fixed but output had decreased due to a decrease in demand. Year 1 Year 2 Selling price $.32 $.32 Production costs $.25 $.33 Overhead costs $1,200,000 $1,200,000 Pipe production 10,000,000 feet 6,000,000 feet The plant has the capacity to produce 15,000,000 feet of pipe per year. In order to sell that many feet, the price would have to be reduced to $.28 per foot. Would this scenario be a good business decision?...
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This note was uploaded on 02/13/2010 for the course BUS 214 taught by Professor Violapersia during the Spring '10 term at SUNY Stony Brook.

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