Chillingsworth Industries Inc., operating at full capacity, sold 35,000 units at a price of $90 per unit during the current year. Its income statement is as follows:Sales $3,150,000Cost of goods sold 1,280,000Gross profit $1,870,000Expenses: Selling expenses$320,000 Administrative expenses620,000 Total expenses 940,000Income from operations $930,000The division of costs between variable and fixed is as follows: VariableFixedCost of goods sold75% 25% Selling expenses60% 40% Administrative expenses40% 60% Management is considering a plant expansion program for the following year that will permit an increase of $720,000 in yearly sales. The expansion will increase fixed costs by $270,000 but will not affect the relationship between sales and variable costs. 7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?$

Cost-volume-profit (CVP) analysis is conducted by companies to see how different sales volume,…

Answered: Chillingsworth Industries Inc.,…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 25E: Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual...

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Chillingsworth Industries Inc., operating at full capacity, sold 35,000 units at a price of $90 per unit during the current year. Its income statement is as follows:

Sales		$3,150,000
Cost of goods sold		1,280,000
Gross profit		$1,870,000
Expenses:
Selling expenses	$320,000
Administrative expenses	620,000
Total expenses		940,000
Income from operations		$930,000

The division of costs between variable and fixed is as follows:

	Variable	Fixed
Cost of goods sold	75%		25%
Selling expenses	60%		40%
Administrative expenses	40%		60%

Management is considering a plant expansion program for the following year that will permit an increase of $720,000 in yearly sales. The expansion will increase fixed costs by $270,000 but will not affect the relationship between sales and variable costs.

7. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?
$

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