Powellcorporation incomestatement

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Unformatted text preview: plus$6,000÷10= $600fordepreciation,totaling$12,600.  Thevariablecosts,thematerials,are10centsperjawbreaker,or$3,600 ($0.10perjawbreaker×3,000jawbreakerspermonth×12months)forthe year. If demand changes from 3,000 to 6,000, Yumball will need a second machine.AssumingYumballbuysasecondmachineidenticaltothefirst machine, it will increase capacity from 4,000 jaw breakers per month to 8,000. The annual relevant range will be between 0 and 96,000 jaw breakers(8,000jawbreakers×12months).  Assume the second machine costs $6,000 and is depreciated using straight ­‑line depreciation over 10 years and zero residual value, just like thefirstmachine.Thiswilladd$600ofdepreciationperyear.  Fixedcostsfornextyearwillincreaseto$13,200.Totalfixedcostsfor nextyearequal$600(depreciationonfirstmachine)+$600(depreciation onsecondmachine)+$12,000(rentandotherfixedoverheadcosts).  Thevariablecostperjawbreakernextyearwillbe90%×$0.10=$0.09. Total variable costs equal $0.09 per jaw breaker × 72,000 jaw breakers = $6,480.    2...
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