Thank you for your help Darius Manufacturing Company manufactures and sells parts for various musical gadgets. The businessearned Operating Income of $420,000 in 2018, when selling price per unit was $200 and the president of Dariusis under pressure to increase operating income in 2019 and is therefore considering the implementation ofstrategies geared at increasing revenues. Data for variable cost per unit and total fixed costs were as follows:| Variable expenses per unit:$20Direct MaterialDirect Labour$50Variable Manufacturing Overhead| $10Fixed expenses:Fixed Manufacturing Overhead$125,000Fixed Selling Costs$75,000Fixed Administrative Costs$100,000You have just begun your internship at the company. The financial controller, Dave Miller, has indicated that thebusiness is considering paying a commission to its sales team as part of the sales expansion effort, which shouldresult in an increase in sales revenue. The head of the marketing department has indicated that the effort of thesales team should result in a 15% increase in sales volume. As a junior member of the team evaluating theproposal, you have been tasked to compute 1) the new break-even sales figure, 2) the new margin of safety and3) the new operating profit, to determine whether the new sales commission plan is indeed viable. Your manageris confident that you can handle the task, because you learned C-V-P analysis in your accounting class.Upon examination of the information furnished by the Accounting Department, you realized that the sales unitfor 2018 was not provided but you are confident that you will be able to determine this from the data set.After completing the calculations for the various scenarios, you performed your analysis and submitted a memoto your manager, who was very pleased with the work done. Your report indicated that the new sales commissionplan would result in a significant increase in operating income but only a small increase in breakeven sales.A few days after, you realized that you made an error in the CVP analysis, as the sales personnel's salariesamounting to $146,400 were inadvertently left out and you therefore did not include this fixed marketing cost inyour computations. You are not sure what to do, as you are afraid that the company's management might notoffer you permanent employment after the internship period.Required:a) Using the equation method, calculate the number of units sold in 2018?b) How would your error affect breakeven sales, margin of safety and operating income under the proposedsales commission plan? (Present ALL relevant scenarios)c) After considering all factors, should you inform your manager about the omission made or simply keepquiet?

A. 1) Number of units sold in 2018 Number of units sold = operating profit + fixed cost ÷…

Required: a) Using the equation method, calculate the number of uni b) How would your error affect breakeven sales, margin of s sales commission plan? (Present ALL relevant scenar c) After considering all factors, should you inform your man. quiet?

Required: a) Using the equation method, calculate the number of uni b) How would your error affect breakeven sales, margin of s sales commission plan? (Present ALL relevant scenar c) After considering all factors, should you inform your man. quiet?

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter20: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 3CMA: Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and...

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Bolger and Co. manufactures large gaskets for the turbine industry. Bolgers per-unit sales price and variable costs for the current year are as follows: Bolgers total fixed costs aggregate to 360,000. Bolgers labor agreement is expiring at the end of the year, and management is concerned about the effects of a new labor agreement on its break-even point in units. The controller performed a sensitivity analysis to ascertain the estimated effect of a 10-per-unit direct labor increase and a 10,000 reduction in fixed costs. Based on these data, the break-even point would: a. decrease by 1,000 units. b. decrease by 125 units. c. increase by 375 units. d. increase by 500 units.
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