McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus variable costs of $13.20 per flag. Each flag sells for $22.00. Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each year to break even. First, select the formula to compute the required sales in units to break even Net sales revenue – variable costs – fixed costs = target profit Rearrange the formula you determined above and compute the required number of flags to break even. The number of flags McKnight must sell each year to break even is 30,000. Based on Bartleby the equation is: Break-even sale in units = fixed costs / contribution margin per unit. Fixed costs = $264,000 %3D Flag sells for $22.00 - (variable costs) $13.20 = 8.80 Break-even sales in units = $264,000 /8.80 = 30,000 %3D %3D Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $17,600 in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.) Contribution margin = contribution margin per unit / sales per unit = $8.80 / $22 X 100 %3D %3D = 40% (Fixed costs + target profit) / CM ratio = required sales in dollars ($264,000 + $17,600) / 40% = $704,000 Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.) Sales revenue = $22.00 X 25,000 flags = $550,000 Variable costs = $13.20 X 25,000 flags = $330,000 Contribution margin = $550,000 - $330,000 = $220,000 Fixed costs = $264,000 Operating income (loss) = ($44,000) %3D %3D %3D

Question

Requirement 4. The company is considering an expansion that will increase fixed costs by 30% and variable costs by $2.20 per flag. Compute the new breakeven point in units and in dollars. Should McKnight undertake the​ expansion? Give your reasoning.​ (Round your final answers up to the next whole​ number.) ​(Use the equation​ approach.)

I received help for the first 3 requirements. I know your policy is not to answer more than 3 parts of a question so I've included everything up to requirement 4.

McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus
variable costs of $13.20 per flag. Each flag sells for $22.00.
Requirement 1. Use the equation approach to compute the number of flags McKnight
must sell each year to break even.
First, select the formula to compute the required sales in units to break even
Net sales revenue – variable costs – fixed costs = target profit
Rearrange the formula you determined above and compute the required number of flags to break even.
The number of flags McKnight must sell each year to break even is 30,000.
Based on Bartleby the equation is:
Break-even sale in units = fixed costs / contribution margin per unit.
Fixed costs = $264,000
%3D
Flag sells for $22.00 - (variable costs) $13.20 = 8.80
Break-even sales in units = $264,000 /8.80 = 30,000
%3D
%3D
Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs
to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal
places.)
Begin by showing the formula and then entering the amounts to calculate the required sales dollars to
earn $17,600 in operating income. (Round the required sales in dollars up to the nearest whole dollar.
For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.)
Contribution margin = contribution margin per unit / sales per unit
= $8.80 / $22 X 100
%3D
%3D
= 40%
(Fixed costs + target profit) / CM ratio = required sales in dollars
($264,000 + $17,600) / 40% = $704,000
Requirement 3. Prepare McKnight's contribution margin income statement for the year ended
December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.)
(Use parentheses or a minus sign for an operating loss.)
Sales revenue = $22.00 X 25,000 flags = $550,000
Variable costs = $13.20 X 25,000 flags = $330,000
Contribution margin = $550,000 - $330,000 = $220,000
Fixed costs = $264,000
Operating income (loss) = ($44,000)
%3D
%3D
%3D
Expand
Transcribed Image Text

McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus variable costs of $13.20 per flag. Each flag sells for $22.00. Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each year to break even. First, select the formula to compute the required sales in units to break even Net sales revenue – variable costs – fixed costs = target profit Rearrange the formula you determined above and compute the required number of flags to break even. The number of flags McKnight must sell each year to break even is 30,000. Based on Bartleby the equation is: Break-even sale in units = fixed costs / contribution margin per unit. Fixed costs = $264,000 %3D Flag sells for $22.00 - (variable costs) $13.20 = 8.80 Break-even sales in units = $264,000 /8.80 = 30,000 %3D %3D Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $17,600 in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.) Contribution margin = contribution margin per unit / sales per unit = $8.80 / $22 X 100 %3D %3D = 40% (Fixed costs + target profit) / CM ratio = required sales in dollars ($264,000 + $17,600) / 40% = $704,000 Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.) Sales revenue = $22.00 X 25,000 flags = $550,000 Variable costs = $13.20 X 25,000 flags = $330,000 Contribution margin = $550,000 - $330,000 = $220,000 Fixed costs = $264,000 Operating income (loss) = ($44,000) %3D %3D %3D

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