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CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter7: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 59P: Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income...
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CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check
Transcribed Image Text:CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,500,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $400,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $400,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check
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