The company wants to increase the capacity of the plant by 500,000 units at a fixed cost of $2 million. The fixed cost will be incurred this year. Should They do it

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Business

Kamden Estrada

2 February, 02:24

The company wants to increase the capacity of the plant by 500,000 units at a fixed cost of $2 million. The fixed cost will be incurred this year. Should They do it

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Kamari Poole · Answer 1

If the company wants to increase the capacity of the plant at a cost of $ 1,000,000 ($ 500,000 x $ 2) the first thing to see is what are the revenues that will allocate the costs, if these are durable (by means of a contract)

It would also have to evaluate what the variable costs are, if these are added to the fixed costs, there should be a profit margin, so to know it first you should know the level of income.