Chloe Enterprises operates a single-product entity. Data relating to the product for 2016 were as follows.Annual volume32 000 unitsSelling price per unit$ 60Variable manufacturing cost per unit28Annual fixed manufacturing costs120 000Variable marketing and distribution costs per unit12Annual fixed non-manufacturing costs360 000RequiredCalculate the break-even in both dollars and units for 2016Calculate the margin of safety in both units and sales dollarsCalculate the profit achieved in 2016 given the annual volume of 32 000 unitsChanges in marketing strategy are planned for 2017. This would increase variable marketing and distribution costs by $4 per unit, and reduce fixed non- manufacturing costs by $80 000 per year. Calculate the units that would need to be sold in 2017 to achieve the same profit as in 2016Would you recommend the change? Explain.

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Answered: Chloe Enterprises operates a…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 4P

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Chloe Enterprises operates a single-product entity. Data relating to the product for 2016 were as follows.

Annual volume	32 000 units
Selling price per unit	$ 60
Variable manufacturing cost per unit	28
Annual fixed manufacturing costs	120 000
Variable marketing and distribution costs per unit	12
Annual fixed non-manufacturing costs	360 000

Required

Calculate the break-even in both dollars and units for 2016
Calculate the margin of safety in both units and sales dollars
Calculate the profit achieved in 2016 given the annual volume of 32 000 units
Changes in marketing strategy are planned for 2017. This would increase variable marketing and distribution costs by $4 per unit, and reduce fixed non- manufacturing costs by $80 000 per year. Calculate the units that would need to be sold in 2017 to achieve the same profit as in 2016
Would you recommend the change? Explain.

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