Grey Company is considering replacing its existing cutting machine with a new machine that, according to the manufacturer, is more efficient in terms of energy consumption-a variable cost of production. In this regard, it would like to do some financial planning, including "what-if" analysis. Budgeted information regarding the two machines is as follows: Required:
1. Determine the sales volume at which the costs are the same for both machines.
2. What amount of sales, in dollars, for the new machine would produce a 10% profit margin (i.e. ratio of operating profit to sales = 10%)?

Question

Grey Company is considering replacing its existing cutting machine with a new machine that, according to the manufacturer, is more efficient in terms of energy consumption-a variable cost of production. In this regard, it would like to do some financial planning, including "what-if" analysis. Budgeted information regarding the two machines is as follows:  Required:
1. Determine the sales volume at which the costs are the same for both machines.
2. What amount of sales, in dollars, for the new machine would produce a 10% profit margin (i.e. ratio of operating profit to sales = 10%)?

Quizplus · Accepted Answer

The Answer of Grey Company is considering replacing its existing cutting machine with a new machine that, according to the manufacturer, is more efficient in terms of energy consumption-a variable cost of production. In this regard, it would like to do some financial planning, including "what-if" analysis. Budgeted information regarding the two machines is as follows:  Required:
1. Determine the sales volume at which the costs are the same for both machines.
2. What amount of sales, in dollars, for the new machine would produce a 10% profit margin (i.e. ratio of operating profit to sales = 10%)?

Grey Company Is Considering Replacing Its Existing Cutting Machine with a New