Question

efer to the original data. The company is discussing the construction of a new, automated manufacturing plant. The new plant would slash variable expenses per ball by 40.00%, but it would cause fixed expenses per year to double. If the new plant is built, what would be the company’s new CM ratio and new break-even point in balls?

Answer 1

Answer: CM ratio will be 0.6

Explanation: The New plant will reduce variable expenses by 40%, definitely its a good one which would the company 60% on other expenses which can be easily broken down to different thresholds to get proper picture how the break even point will be by the time the plant is built.