Question:
Vargo Video and one of its competitors, New Wave Company, both make DVD players. Vargo Video uses a traditional, labor-intensive manufacturing process. New Wave Company has invested in a completely automated system. The factory employees are involved only in setting up, adjusting, and maintaining the machinery.
|
|
Vargo Video
|
New Wave Company
|
|
Sales
|
$800,000
|
$800,000
|
|
Variable costs
|
480,000
|
160,000
|
|
Contribution margin
|
320,000
|
640,000
|
|
Fixed costs
|
200,000
|
520,000
|
|
Net income
|
$120,000
|
$120,000
|
Calculate the break-even point.