Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows:
The Fixed Manufacturing Overhead provides a capacity of 50,000 units. The Production Manager has proposed leasing a new machine at a cost of $80,000 per year. This will reduce Direct Labour by 30% and improve quality so the the selling price per unit can be increased by $10. Production and sales are expected to remain the same as last year.
Required:
Prepare a statement of operating income assuming the leasing proposal is accepted.

Question

Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows:
  The Fixed Manufacturing Overhead provides a capacity of 50,000 units. The Production Manager has proposed leasing a new machine at a cost of $80,000 per year. This will reduce Direct Labour by 30% and improve quality so the the selling price per unit can be increased by $10. Production and sales are expected to remain the same as last year.
Required:
Prepare a statement of operating income assuming the leasing proposal is accepted.

Quizplus · Accepted Answer

The Answer of Macadamia Co. produced and sold 40,000 units last year. Per unit revenue and costs were as follows:
  The Fixed Manufacturing Overhead provides a capacity of 50,000 units. The Production Manager has proposed leasing a new machine at a cost of $80,000 per year. This will reduce Direct Labour by 30% and improve quality so the the selling price per unit can be increased by $10. Production and sales are expected to remain the same as last year.
Required:
Prepare a statement of operating income assuming the leasing proposal is accepted.