Case Study-CVP Mini Case

Case Study-CVP Mini Case - 3. What other factors should the...

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1. What is the number of juices per day that must be sold to achieve break even? Cost of Machine: $50,000 Selling Price: $2.00 Variable Cost: $0.50 Unit Contribution Margin= $1.50 Unit Sales to Break Even= 33,333 2. Upon further investigation, the owner learns that the new machine requires substantial maintenance, which  will increase the variable cost by $.50 per juice. How would this information affect your answer? New Variable Cost: $1.00 New Unit Contribution Margin= $1.00 New Unit Sales to Break Even= 50,000 This information affected my answer by increasing my break- even point from 33,333 units to 50,000 units.
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Unformatted text preview: 3. What other factors should the owner consider before making the final decision to purchase the machine? The owner should weigh factors such as expanding the specialty juices and mixes and opening on weekends; as an attempt to compete with other juice chains. When the contribution margin is higher the break even sales is lower; this allows the owner to make profit faster. So purchasing a machine with fewer problems will lower their variable cost, which will allow his business to turn a profit sooner....
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This note was uploaded on 07/22/2011 for the course ACCT 2071 taught by Professor J during the Spring '11 term at Miami Dade College, Miami.

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Case Study-CVP Mini Case - 3. What other factors should the...

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