Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove Company expects fixed costs of $300,000, a unit variable cost of $41, and a unit selling price of s61. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize operating income of $70,000. units

Break-even sales and sales to realize operating income For the current year ended March 31, Cosgrove Company expects fixed costs of $300,000, a unit variable cost of $41, and a unit selling price of s61. a. Compute the anticipated break-even sales (units). units b. Compute the sales (units) required to realize operating income of $70,000. units

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 11E

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Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of 188 per unit during the current year. Its income statement is as follows: The division of costs between variable and fixed is as follows: Management is considering a plant expansion program for the following year that will permit an increase of 11,280,000 in yearly sales. The expansion will increase fixed costs by 5,000,000 but will not affect the relationship between sales and variable costs. Instructions 1. Determine the total variable costs and the total fixed costs for the current year. 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. 3. Compute the break-even sales (units) for the current year. 4. Compute the break-even sales (units) under the proposed program for the following year. 5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the 60,000,000 of operating income that was earned in the current year. 6. Determine the maximum operating income possible with the expanded plant. 7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year? 8. Based on the data given, would you recommend accepting the proposal? Explain.
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