A Company Is Looking into Two Alternative Methods of Producing

question 56

Essay

A company is looking into two alternative methods of producing its product. The following information about the two alternatives is available. If the company's expected sales volume is 35,000 units, which alternative should be selected?Prepare forecasted income statements and compute degree of operating leverage to assess the alternatives.
$$\begin{array} { l | l | l } & \text { Alternative\#1 } & \text { Alternative \#2 } \\\hline \text { Variable costs per unit } & \$ 8 & \$ 12 \\\hline \text { Fixed costs } & \$ 240,000 & \$ 140,000 \\\hline \text { Selling price per unit } & \$ 20 & \$ 20\end{array}$$

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Definitions:

Facial Hair

Hair grown on the face, typically on areas where men commonly grow hair such as the chin, cheeks, and upper lip, often considered a sign of masculinity or maturity in various cultures.

Breast Development

The natural physiological process of growth and change that female breasts undergo during puberty and over the life span.

Emotional-Sexual Relationships

Connections between individuals that involve both emotional intimacy and sexual attraction or activity.

Homosexuals

Individuals who are romantically or sexually attracted to people of their same sex.