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# ACT 325 MODULE 7 CRITICAL THINKING

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ACT 325 MODULE 7 CRITICAL THINKING

Complete the following exercise. Provide your answers in an MSWord document or as an Excel spreadsheet with each exercise or problem clearly labeled. Use CSU-Global APA formatting and citations if needed.

Trimble Company sells an electronic toy for \$40. The variable cost is \$24 per unit and the fixed cost is \$32,000 per year. Management is considering the following changes:

Alternative #1

Lease a new packaging machine for \$4,000 per year, which will reduce variable cost by \$1 per unit.

Alternative #2

Increase selling price 10 percent to counteract an expected 25 percent increase in fixed cost.

Alternative #3

Reduce fixed cost by 25 percent by moving to a lower rent location. This would have the effect of increasing variable costs by 10 percent.

Required:

Answer each of the following questions independently, showing your calculations. Also, provide a few sentences explaining your answers: Round calculations to the nearest unit

1.     Determine the current break-even point in units and dollars.

2.     Determine the expected profit assuming alternative #1 and sales of 3,200 units.

3.     Determine the break-even point in units and dollars assuming alternative #2.

4.     Determine the break-even point required in units and dollars assuming alternative #3.

5.     Determine the volume of sales required to earn \$23,600 assuming alternative #3.

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