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ACCT 221 WEEK 5 HOMEWORK

ACCT 221 WEEK 5 HOMEWORK

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Best Harmonica Company manufactures and sells harmonicas to distributors. The model they produce sells to the distributors for $8.00 each. Following are cost estimates:
FACTS:1. Elliott Incorporated manufactures garden tools, and although the manufacturing equipment is perfectly functional, it is not modern.2. Upgrading to modern equipment would speed up the manufacturing process such that direct labor and variable manufacturing costswould be reduced by 40% on a per-unit basis. Hint: You do not need current units produced to calculate this problem.3. The cost of such an upgrade would equal $1,500,000 per year for depreciation and financing costs net of tax benefits of these costs.4. The additional costs would be accounted for as fixed manufacturing overhead.5. Elliott is currently operating at full capacity and management believes they could increase sales to $6,000,000 at current prices ifthey had additional capacity.Elliott's current sales and costs are as follows:


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