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Problem 7-40 Phoenix-based CompTronics

Managerial Accounting: Creating Value in a Dynamic Business Environment

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Phoenix – based CompTronics manufactures audio speakers for desktop computers.  The following data relate to the period just ended when the company produced and sold 42, Sales \$4,032,000 Variable Costs \$1,008,000 Fixed Costs \$2,736,000

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,000 speaker sets:
1. Calculate the company's current income and determine the level of dollar sales needed to Sales revenue (42,000 x \$96) \$4,032,000 Less variable expenses (42,000 x \$24) \$1,008,000 Total contribution margin \$3,024,000 Less fixed expenses \$2,736,000 Profit \$288,000 Double profit \$576,000 Unit Costs \$96 Variable cost per unit \$24 Unit contribution margin \$72 Units sold \$46,000

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o double that figure, assuming that manufacturing operations remain in the United States.

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2. Determine the break-even point in speaker sets if operations are shifted to Mexico.  Sales revenue (42,000 x \$96) \$4,032,000 Less variable expenses (42,000 x \$21.60) \$907,200 Total contribution margin \$3,124,800 Less fixed expenses \$2,380,800 Profit \$744,000 Unit Costs \$96 Variable cost per unit \$21.60 Unit contribution margin \$74.40 Units sold 32000

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3. Assume that management desires to achieve the Mexican break-even point; however, operatio

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