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a)
Break-even Point:
It refers to a point in the level of operations at which a company experiences its revenues generated is equal to its costs incurred. Thus, when a company reaches at its break-even point, it reports neither an income nor a loss from operations. The formula to calculate the break-even point in sales units is as follows:
To compute: the break-even number of barrels for the current year.
b)
To compute: the anticipated break-even number of barrels for the following year.
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Chapter 19 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- Break-Even Sales Cold One Brewing Company reported the following operating information for a recent year (in millions): Sales Cost of goods sold Gross profit Marketing, general, and admin. expenses Income from operations $4,592 (1,148) $3,444 (492) $ 2,952 Assume that Cold One sold 41 million barrels of beer during the year, variable costs were 75% of the cost of goods sold and 50% of marketing, general, and administrative expenses, and that the remaining costs are fixed. For the following year, assume that Cold One expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $15.99 million. a. Compute the break-even sales (barrels) for the current year. Round your answer to two decimal places. Enter your answers in millions. million barrels b. Compute the anticipated break-even sales (barrels) for the following year. Round your answer to two decimal places. Enter your…arrow_forwardBreak-Even Sales BeerBev, Inc., reported the following operating information for a recent year: $4,224,000 $1,056,000 440,000 $1,496,000 $ 2,728,000* Net sales Cost of goods sold Selling, general, and administrative expenses Income from operations *Before special items In addition, assume that BeerBev sold 44,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general, and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $14,500. When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place. a. Compute the break-even number of barrels for the current year. barrels b. Compute the anticipated…arrow_forwardBreak-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $10,560,000 Cost of goods sold $2,640,000 Selling, general, and administrative expenses 990,000 $3,630,000 Income from operations $ 6,930,000* *Before special items In addition, assume that BeerBev sold 55,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general, and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $34,700. When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place. a. Compute the break-even number of barrels for the current year. fill in the…arrow_forward
- Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $4,400,000 Cost of goods sold $1,100,000 Selling, general and administration 250,000 $1,350,000 Income from operations $ 3,050,000* *Before special items In addition, assume that BeerBev sold 25,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, gener and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixe costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $12,000. When computing the cost per unit amounts for the break-even formula, round to two decimal places. If required, round your final answer to one decimal place. a. Compute the break-even number of barrels for the current year. barrels b. Compute the anticipated break-even…arrow_forwardPro forma income statement The marketing department of Metroline Manufacturing estimates that its sales next year will be $1.58 million. Interest expense is expected to remain unchanged at $32,000, and the firm plans to pay $69,000 in cash dividends. Metroline Manufacturing's income statement for the previous year is given in the table, along with a breakdown of the firm's cost of goods sold and operating expenses into their fixed and variable components. a. Use the percent-of-sales method to prepare a pro forma income statement for next year.arrow_forwardBreak-Even Sales BeerBev, Inc., reported the following operating information for a recent year (in millions): $6,688 Sales $1,672 Cost of goods sold $5,016 Gross profit 456 Marketing, general, and admin. expenses $ 4,560 Income from operations Assume that BeerBev sold 38 million barrels of beer during the year, that variable costs were 75% of the cost of goods sold and 50% of marketing, general and administration expenses, and that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $19.38 million. a. Compute the break-even sales (in barrels) for the current year. Round your answer to two decimal places. Enter your answers in millions.arrow_forward
- 6. Determine the maximum operating income possible with the expanded plant. 4,350,000 x 7. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year? 35,730,000 x Incomearrow_forwardBreak - Even Sales Cold One Beverage Company reported the following operating information for a recent year (in millions): Line Item Description Amount Net sales $3,600 Cost of goods sold (900) Gross profit $2,700 Selling, general, and admin. expenses (350) Operating income $2,350 Assume that Cold One sold 25 million barrels during the year, variable costs were 70% of the cost of goods sold and 50% of selling, general, and administrative expenses, and that the remaining costs are fixed. For the following year, assume that Cold One expects pricing, variable costs per barrel, and fixed costs to remain constant, except that new distribution and general office facilities are expected to increase fixed costs by $13.35 million. a. Compute the break-even sales (barrels) for the current year. Round intermediate computations to the nearest cent and final answer up the nearest whole barrel fill in the blank 1 of 1 million barrels b. Compute the anticipated break - even sales (barrels) for the…arrow_forwardCalculating Economic Value Added Barnard Manufacturing earned operating income last year as shown in the following income statement: Sales $4,000,000 Cost of goods sold 2,100,000 Gross margin $1,900,000 Selling and administrative expense 1,100,000 Operating income $800,000 Less: Income taxes (@ 40%) 320,000 Net income $480,000 At the beginning of the year, the value of operating assets was $2,700,000. At the end of the year, the value of operating assets was $2,300,000. Total capital employed equaled $1,400,000. Barnard’s actual cost of capital is 12%. Required: Calculate the EVA for Barnard Manufacturing.arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 114,800 units at a price of $108 per unit during the current year. Its income statement is as follows: Sales $12,398,400 Cost of goods sold 4,392,000 Gross profit $8,006,400 Expenses: Selling expenses $2,196,000 Administrative expenses 1,332,000 Total expenses 3,528,000 Income from operations $4,478,400 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative expenses 30% 70% Management is considering a plant expansion program for the following year that will permit an increase of $972,000 in yearly sales. The expansion will increase fixed costs by $129,600, but will not affect the relationship between sales and variable costs. 4. Compute the break-even sales (units) under the proposed program for the following…arrow_forwardRequired information Annie's Homemade Ice Cream provided the following data for this year: Sales Net operating income Average operating assets Required: Consider each question below Independently. Carry out all computations to two decimal places. $ 300,000 $ 54,000 $ 187,500 1. Compute the company's margin, turnover, and return on Investment (ROI) for this year. 2. The company is considering buying some billboard advertising with the expectation it would grow next year's sales and net operating Income by $50,000 and $20,000, respectively. If this plan is Implemented, what would become next year's margin, turnover, and ROI? 3. The company is considering buying a second cargo trailer and mobile cold plate push cart to expand its mobile sales. If the company Implements this plan, It expects next year's sales, net operating Income and average operating assets to Increase by $80,000, $30,000, and $10,000, respectively. What would become next year's margin, turnover, and ROI? Complete this…arrow_forwardNet Income Planning Holland Corporation earned an after-tax net income of $182,000 last year. Fixed costs were $750,000. The selling price per unit of its product was $130, of which $60 was a contribution to fixed cost and net income. The income tax rate was 35%. Round UP answers to the nearest unit, when applicable. a. How many units of product were sold last year? 0 units b. What was the break-even point in units last year? 0 c. The company wishes to increase its after-tax net income by 20% this year. If selling prices and the income tax rate remain unchanged, how many units must be sold? 0 units unitsarrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
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