Allied Inc AUsing This Information, Determine the Breakeven Volume

question 27

Essay

Allied Inc. is considering the purchase of a new piece of equipment. Relevant data are shown below. $\begin{array}{|l|rr|}\hline \text { Annual Fixed Cost } &{\$ 700,000} \\\hline \text { Variable Cost per Unit } & \$ & 75 \\\hline \text { Revenue per Unit } & \$ & 200 \\\hline\end{array}$
a.Using this information, determine the breakeven volume.
b.If the anticipated demand for the product is 5,000 units, should Allied purchase the new equipment?

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Definitions:

Estimated Annual Net Income

The projection or forecast of a company's net income over a one-year period, considering all expected revenues and expenses.

Straight-Line Depreciation

A method of allocating the cost of a physical asset evenly over its useful life.

Average Rate of Return

The ratio of the average annual profit to the initial investment, expressed as a percentage, used to assess the profitability of an investment.

Estimated Annual Net Income

The projection of a company's net income over the course of a future year, based on current trends and expectations.