Ruiz Company Produces and Sells a Product That Has Variable

question 143

Essay

Ruiz Company produces and sells a product that has variable costs of $50 and a selling price of $90.Its current sales total $270,000 per month.Fixed manufacturing costs total $40,000 per month and fixed selling and administrative costs total $35,000 per month.The company is considering a proposal that will increase the selling price by 10%,increase the fixed manufacturing costs by 10%,and increase the fixed selling and administrative costs by $1,500.
Required:
1)Compute the company's current break-even point in units.
2)Compute the company's current income and margin of safety in dollars.
3)Compute the break-even point in units assuming the proposal is accepted.
4)Compute the company's income assuming the proposal is accepted and sales total 3,300 units.Should the proposal be accepted?

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Definitions:

Planned Obsolescence

A business strategy in which the obsolescence of a product is planned and built into it from its conception, ensuring that consumers will need to purchase new products.

Ethical Issue

A situation or problem that requires individuals or organizations to choose between alternatives that must be evaluated as right or wrong, ethical or unethical.

Updated Product

A product that has been improved or modified with new features or designs to enhance its performance or appeal.

Environmentally Friendly

Practices or products that have a minimal impact on the environment, often focusing on reducing pollution and conserving resources.