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McLennon Company has plant capacity of 100,000 units per year, but its budget for the year indicates only 60,000 units will be produced and sold

McLennon Company has plant capacity of 100,000 units per year, but its budget for the year indicates only 60,000 units will be produced and sold
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Price: $6.99
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Model: A
Average Rating: 5 out of 5 Stars!

McLennon Company has plant capacity of 100,000 units per year, but its budget for the year indicates only 60,000 units will be produced and sold. The entire budget is as follows: Sales (60,000 units at $4) $240,000 Cost of goods sold (based on production of 60,000 units) Direct materials (variable) $60,000 Direct labor (variable) 30,000 Variable overhead 45,000 Fixed overhead 75,000 Total cost of goods sold 210,000 Gross margin 30,000 Less selling and admin (fixed) 60,000 Operating income (loss) $( 30,000) a. Given the budgeted selling price and cost data, how many units would McLennon have to sell to break even? b. Market research indicates that if McLennon were to drop its selling price to $3.80 per unit, it could sell 100,000 units. Would you recommend the drop in price? What would the new operating income or loss be? NOTE: This question is NOT our property; we are only suggesting solution of this question.

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