Allison Radios manufactures a complete line of radios and communication equipment for law

QUESTION

Allison
Radios manufactures a complete line of radios and communication equipment for
law enforcement agencies. The average selling price of its finished product is
$180 per unit. The variable cost for these same units is $126. Allison Radios
incurs fixed costs of $540,000 per year.

a.
What is the break-even point in units for the company?
b.
What is the dollar sales volume the firm must achieve in order to reach the
break-even point?
c.
What would be the firm’s profit or loss at the following units of production
sold: 12,000 units? 15,000 units? 20,000 units?
d.
Find the degree of operating leverage for the production and sales levels given
in part (c).

ANSWER:

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