1.
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:
the total fixed costs and the total variable costs for the current year.
2(A)
the unit variable cost for the current year.
3.
To compute: the break-even sales (units) for the current year.
4.
To compute: the break-even sales (units) under the proposed program for the following year.
5.
the amount of sales (units) if the company desires a target profit of $692,500.
6.
the maximum income from operations possible with the expanded plant.
7.
the income or loss from operations for the following year if the proposal is accepted and the sales remains same.
8.
To explain: whether to recommend for accepting the proposal.
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Chapter 19 Solutions
EBK FINANCIAL & MANAGERIAL ACCOUNTING
- Break-even sales under present and proposed conditions Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of 45 per unit during the current year. Its income statement is as follows: The division of costs between variable and fixed is as follows: Management is considering a plant expansion program for the following year that will permit an increase of 900,000 in yearly sales. The expansion will increase fixed costs by 212,500 but will not affect the relationship between sales and variable costs. Instructions Determine the total fixed costs and the total variable costs for the current year. Determine (A) the unit variable cost and (B) the unit contribution margin for the current year. Compute the break-even sales (units) for the current year. Compute the break-even sales (units) under the proposed program for the following year. Determine the amount of sales (units) that would be necessary under the proposed program to realize the 692,500 of operating income that was earned in the current year. Determine the maximum operating income possible with the expanded plant. If the proposal is accepted and sales remain at the current level, what will the operating income or loss be for the following year? Based on the data given, would you recommend accepting the proposal? Explain.arrow_forwardBreak-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_forwardBreak-even sales under present and proposed conditions Howard Industries Inc., operating at full capacity, sold 64,000 units at a price of $45 per unit during the current year. Its income statement is as follows: Line Item Description Amount Amount Sales $2,880,000 Cost of goods sold (1,400,000) Gross profit $1,480,000 Expenses: Selling expenses $400,000 Administrative expenses 387,500 Total expenses (787,500) Operating income $692,500 The division of costs between variable and fixed is as follows: Line Item Description Variable Fixed Cost of goods sold 75% 25% Selling expenses 60% 40% Administrative expenses 80% 20% Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs. Required: 6. Determine the maximum operating…arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 103,400 units at a price of $120 per unit during the current year. Its income statement is as follows: Sales $12,408,000 Cost of goods sold 4,400,000 Gross profit $8,008,000 Expenses: Selling expenses $2,200,000 Administrative expenses 1,320,000 Total expenses 3,520,000 Income from operations $4,488,000 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 $960,000 in yearly sales. The expansion will increase fixed costs by $128,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 143,000 units at a price of $102 per unit during the current year. Its income statement is as follows: Sales $14,586,000 Cost of goods sold 5,168,000 Gross profit $9,418,000 Expenses: Selling expenses $2,584,000 Administrative expenses 1,564,000 Total expenses 4,148,000 Income from operations $5,270,000 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 $1,326,000 in yearly sales. The expansion will increase fixed costs by $176,800, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 143,000 units at a price of $111 per unit during the current year. Its income statement is as follows: Sales Cost of goods sold $15,873,000 5,624,000 Gross profit Expenses: Selling expenses $2,812,000 Administrative expenses 1,702,000 Total expenses $10,249,000 4,514,000 $5,735,000 Income from operations The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,443,000 in yearly sales. The expansion will increase fixed costs by $192,400, but will not affect the relationship between sales and variable costs. Required: 5. Determine the amount of sales (units) that would be 1. Determine the total variable costs and the total fixed costs for the current ye that was earned in…arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 161,800 units at a price of $132 per unit during the current year. Its income statement is as follows: Sales $21,357,600 Cost of goods sold 7,568,000 Gross profit $13,789,600 Expenses: Selling expenses $3,784,000 Administrative expenses 2,288,000 Total expenses 6,072,000 Income from operations $7,717,600 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 $1,980,000 in yearly sales. The expansion will increase fixed costs by $264,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 127,900 units at a price of $51 per unit during the current year. Its income statement is as follows: Sales $6,522,900 Cost of goods sold 2,312,000 Gross profit $4,210,900 Expenses: Selling expenses $1,156,000 Administrative expenses 697,000 Total expenses 1,853,000 Income from operations $2,357,900 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 $510,000 in yearly sales. The expansion will increase fixed costs by $68,000, but will not affect the relationship between sales and variable costs. Required: Compute the break-even sales (units) under the proposed program for the following…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 127,900 units at a price of $51 per unit during the current year. Its income statement is as follows: Sales $6,522,900 Cost of goods sold 2,312,000 Gross profit $4,210,900 Expenses: Selling expenses $1,156,000 Administrative expenses 697,000 Total expenses 1,853,000 Income from operations $2,357,900 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 $510,000 in yearly sales. The expansion will increase fixed costs by $68,000, but will not affect the relationship between sales and variable costs. Required:arrow_forward
- Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 112,800 units at a price of $81 per unit during the current year. Its income statement is as follows: Sales $9,136,800 Cost of goods sold 3,240,000 Gross profit $5,896,800 Expenses: Selling expenses $1,620,000 Administrative expenses 972,000 Total expenses 2,592,000 Income from operations $3,304,800 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 $810,000 in yearly sales. The expansion will increase fixed costs by $108,000, but will not affect the relationship between sales and variable costs. 5. Determine the amount of sales (units) that would be necessary under the proposed program to…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 152,400 units at a price of $120 per unit during the current year. Its income statement is as follows: Sales $18,288,000 Cost of goods sold 6,480,000 Gross profit $11,808,000 Expenses: Selling expenses $3,240,000 Administrative expenses 1,960,000 Total expenses 5,200,000 Income from operations $6,608,000 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 $1,440,000 in yearly sales. The expansion will increase fixed costs by $192,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 169,200 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $15,228,000 Cost of goods sold 5,400,000 Gross profit $9,828,000 Expenses: Selling expenses $2,700,000 Administrative expenses 1,620,000 Total expenses 4,320,000 Income from operations $5,508,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $1,350,000 in yearly sales. The expansion will increase fixed costs by $180,000, but will not affect the relationship between sales and variable costs. Required: 1. Determine the total variable costs and the total fixed costs for the current year. Total variable costs Total fixed costs 2. Determine (a) the unit variable…arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
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