Can anyone help me with this question?
Lewis Co is considering automating its production line. If it chooses to do so, fixed costs will rise from $40,000 per year to $120.000 per year, while variable costs will fall from $22 per unit to $12 per unit.
What is the minimum annual production level at which automation would be worthwhile (to the nearest unit)?
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ACCA PM Sep 2022
3y ago#1He will have extra fixed costs of $80,000.
Each unit produced will save $8 in variable costs.
So how many units will he need to produce in order to save $80,000?
10,000 units
3y ago#3Correct!
I think he will save 10$ per unit as it is 22-12, final answer would be 8,000 units.
3y ago#5Sorry - you are correct. I read the question too quickly :-(
Sir John would this not be solved theough high-low method
3y ago#7No, not really. It is just using basic knowledge and arithmetic :-)
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