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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:
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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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