Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. Thecompany has a maximum production capacity of 100,000 units per year. Operating at normal capacity, thebusiness earned Operating Income of $600,000 in 2020. The following cost data has been prepared for theyear ended December 31, 2020.Selling price per unit...$50.00Production Costs:Direct Materials ...$10.00........Direct Labour .$8.00........Variable Manufacturing Overhead.$7.00Fixed Manufacturing Overhead....Fixed Selling & Administrative Expenses...Variable selling expense per unit ...$450,000$300,000...... .....$10.00Required:a)Using the equation method, calculate the normal capacity of the business.b)Calculate:i) the variable production cost per unitii) the total production cost per unitiii) The total variable cost per unitiv) Total Fixed Costsc)Calculate Greek's break-even point in units and in sales dollars.d)Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution marginincome statement for the year ended December 31, 2020, detailing the components of total variablecosts and total fixed costs, and clearly showing contribution and net income.The recession in the economy in 2021 is expected to result in a reduction of the number of units sold.Assuming that Greek is operating at normal capacity, by how much can sales decline in units and salesdollars in 2021 without the company making a loss?f)The President of Greek Manufacturing is under pressure from shareholders to increase operatingincome by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in2021. Using the equation method, compute the number of units that would have to be sold in 2021 toreach the shareholders desired profit level. Is this a realistic goal?

Contribution margin income statement is the statement of income and loss which is prepared by the…

d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income. e) The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that Greek is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss? f) The President of Greek Manufacturing is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?

d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income. e) The recession in the economy in 2021 is expected to result in a reduction of the number of units sold. Assuming that Greek is operating at normal capacity, by how much can sales decline in units and sales dollars in 2021 without the company making a loss? f) The President of Greek Manufacturing is under pressure from shareholders to increase operating income by 30% in 2021. Management expects per unit data and total fixed costs to remain the same in 2021. Using the equation method, compute the number of units that would have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6EB: Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit...

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