Vargo Video and one of its competitors, New Wave Company, both make DVD players. Vargo Video uses a traditional, labor intensive manufacturing process. New Wave Company has invested in a completely automated system. The factory employees are involved only in setting up, adjusting, and maintaining the machinery.
|
Vargo Video |
New Wave Company |
|
|
Sales |
$800,000 |
$800,000 |
|
Variable costs |
480,000 |
160,000 |
|
Contribution margin |
320,000 |
640,000 |
|
Fixed costs |
200,000 |
520,000 |
|
Net income |
$120,000 |
$120,000 |
Calculate the break even point.