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Break-Even Sales and Cost-Volume-Profit GraphLast year, Ridgecrest Inc. had sales of $3,221,680, based on a unit selling price of $440. The variable cost per unit was $280, and fixed costs were $836,800. The maximum sales within Ridgecrest Inc.'s relevant range are 13,000 units. Ridgecrest Inc. is considering a proposal to spend an additional $168,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity. Using the cost-volume-profit graph prepared in part (1), determine (a) the operating income for last year and (b) the maximum operating income that could have been realized during the year.Operating income$Maximum operating income$

Question

Break-Even Sales and Cost-Volume-Profit Graph

Last year, Ridgecrest Inc. had sales of $3,221,680, based on a unit selling price of $440. The variable cost per unit was $280, and fixed costs were $836,800. The maximum sales within Ridgecrest Inc.'s relevant range are 13,000 units. Ridgecrest Inc. is considering a proposal to spend an additional $168,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

 

Using the cost-volume-profit graph prepared in part (1), determine (a) the operating income for last year and (b) the maximum operating income that could have been realized during the year.

Operating income $
Maximum operating income $
check_circleAnswer
Step 1

(a)

 

Calculation of operating income for the last year:

 

The results of the formulas used in the excel s...

A
Ridgecrest Inc.
1
Income Statement
2
For the year ending...
3
Amount (S)
Particulars
5 Sales Revenue
4
3221680
Less: Variable expense(3221680/440)*280
6
7 Contribution MarginB5-B6
8 Less: Fixed expense
9 Operating Income
836800
=B7-B8
A
Ridgecrest Inc
1
Income Statement
2
For the year ending...
Amount (S)
3
Particulars
4
5 Sales Revenue
3221680
6 Less: Variable expense
2050160
1171520
7 Contribution Margin
8 Less: Fixed expense
836800
9 Operating Income
334720
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A Ridgecrest Inc. 1 Income Statement 2 For the year ending... 3 Amount (S) Particulars 5 Sales Revenue 4 3221680 Less: Variable expense(3221680/440)*280 6 7 Contribution MarginB5-B6 8 Less: Fixed expense 9 Operating Income 836800 =B7-B8 A Ridgecrest Inc 1 Income Statement 2 For the year ending... Amount (S) 3 Particulars 4 5 Sales Revenue 3221680 6 Less: Variable expense 2050160 1171520 7 Contribution Margin 8 Less: Fixed expense 836800 9 Operating Income 334720

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