Zickman Co. makes and sells a single product. The current selling price is $45 per unit. Variable costs are $27 per unit, and fixed expenses total $64,000 per month. Sales volume for August totaled 7,200 units.
a. Calculate the operating income for August.
b. Calculate the break-even point in terms of units sold and total revenues.
c. Management is considering the use of robotics in the production process. If this were done, direct labor costs of $12 per unit of product could be saved, but fixed expenses would increase by $70,000 per month.
1. Calculate operating income at a volume of 7,200 units per month with the new cost structure.
2. Calculate the break-even point in units with the new cost structure.