Northlake Nordic Centre Inc. (price 30, variable cost 9, fixed costs 315,000) could automate snowmaking: variable cost falls to 6 per skier-day and fixed costs rise to $378,000. Compute break-even and operating income at 20,000 skier-days after automation, the indifference volume between the two structures, and operating income at 25,000 skier-days after automation.
Northlake Nordic Centre Inc. (price 30, variable cost 9, fixed costs 315,000) could automate snowmaking: variable cost falls to 6 per skier-day and fixed costs rise to $378,000. Compute break-even and operating income at 20,000 skier-days after automation, the indifference volume between the two structures, and operating income at 25,000 skier-days after automation.
Answer
Break-even in skier-days after automation → 15750 · Operating income at 20,000 skier-days after automation → 102000 · Indifference volume in skier-days → 21000 · Operating income at 25,000 skier-days after automation → 222000
Cells - Break-even in skier-days after automation · ±0 - Operating income at 20,000 skier-days after automation · ±0 - Indifference volume in skier-days · ±0 - Operating income at 25,000 skier-days after automation · ±0 CM after = 30 − 6 = 24. Break-even = 378,000 ÷ 24 = **15,750**. OI at 20,000 = 24 × 20,000 − 378,000 = **102,000** (current: 105,000). Indifference: 21u − 315,000 = 24u − 378,000 → 3u = 63,000 → **21,000**. At 25,000: 600,000 − 378,000 = **222,000** (current: 210,000).
Hermanson Vol 2 ch 21 (the automation trade; the campaign exercise — shapes adapted); OpenStax Managerial Accounting §3.5 (operating leverage — reference) (concept map J8, J9)