If a company who is operating at full capacity has:
Annual revenues = $50,000,000.
Total costs = $45,000,000, of which 40% is fixed and 60%
Answer the independent scenarios below
The company is considering expanding capacity. The additional capacity will add $10,000,000 in annual fixed costs. The contribution margin rate will not be impacted.
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How much in additional sales will be necessary to justify the added capacity?
Assume something has reduced production and increased total variable costs by an additional 10% of sales. Competitive pressures prevent the company from raising sales prices.
Will the company remain profitable?
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