A company produces 1,000 packs of chicken feed per month. Sales price is $4.00 per pack. Variable cost is $1.50 per unit, and fixed costs are $1,800 per month. Management is considering adding a vitamin supplement to improve the value of the product. The variable cost will go up from $1.50 to $1.90 per unit, and fixed costs will go up by 20%. At what price for the new product will the two alternatives (sell as is or process further) produce the same operational income? (Please round to nearest cent.)

Question

Quizplus · Accepted Answer

B) Calculations:
(4.00 × 1,000) - ($1.50 × 1,000) - $1,800 = $700
$700 + (1,000 × $1.90) + ($1,800 × 120%) = $4,760
$4,760/1,000 = $4.76

A Company Produces 1,000 Packs of Chicken Feed Per Month