(Answered) Budgeted break-even point under both the old and the new production environments

A division of Hewlett-Packard Company changed its production operations from one where a large labor force assembled electronic components to an automated production facility dominated by computer-controlled robots. The change was necessary because of fierce competitive pressures.;Improvements in quality, reliability, and flexibility of production schedules were necessary just to match the competition. As a result of the change, variable costs fell and fixed costs increased, as shown in the following assumed budgets;Old Production Operation New Production Operation;Unit variable cost;Material $.88 $.88;Labor 1.22.22;Total per unit $ 2.10 $ 1.10;Monthly fixed costs;Rent and depreciation $450,000 $ 875,000;Supervisory labor 80,000 175,000;Other 50,000 90,000;Total per month $580,000 $1,140,000;Expected volume is 600,000 units per month, with each unit selling for $3.10. Capacity is 800,000 units.;1. Compute the budgeted profit at the expected volume of 600,000 units under both the old and the new production environments.;2. Compute the budgeted break-even point under both the old and the new production environments.;3. Discuss the effect on profits if volume falls to 500,000 units under both the old and the new production environments.;4. Discuss the effect on profits if volume increases to 700,000 units under both the old and the new production environments.;5. Comment on the riskiness of the new operation versus the old operation.
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Budgeted break-even point under both the old and the new production environments

 


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