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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.
(B)
the unit contribution margin 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 $15,000,000.
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 5 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
- Margin of safety Jorgensen Company has sales of 380,000,000, and the break-even point in sales dollars is 323,000,000. Determine Jorgensen Companys margin of safety as a percent of current sales.arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 500,000 units at a price of $94 per unit during the current year. Its income statement is as follows: Sales $47,000,000 Cost of goods sold 25,000,000 Gross profit $22,000,000 Expenses: Selling expenses $4,000,000 Administrative expenses 3,000,000 Total expenses 7,000,000 Income from operations $15,000,000 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $3,760,000 in yearly sales. The expansion will increase fixed costs by $1,800,000 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…arrow_forwardBreak-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Line Item Description Amount Amount Sales $186,000,000 Cost of goods sold (99,000,000) Gross profit $87,000,000 Expenses: Selling expenses $14,000,000 Administrative expenses 12,400,000 Total expenses (26,400,000) Operating income $60,600,000 The division of costs between variable and fixed is as follows: Line Item Description Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $9,300,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs. 4. Compute the break-even…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 139,000 units at a price of $90 per unit during the current year. Its income statement is as follows: Sales $12,510,000 Cost of goods sold 4,440,000 Gross profit $8,070,000 Expenses: Selling expenses $2,220,000 Administrative expenses 1,320,000 Total expenses 3,540,000 Income from operations $4,530,000 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 $1,170,000 in yearly sales. The expansion will increase fixed costs by $156,000, 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 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
- Break-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_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 Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Line Item Description Amount Amount Sales $188,000,000 Cost of goods sold (100,000,000) Gross profit $88,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 12,000,000 Total expenses (28,000,000) Operating income $60,000,000 The division of costs between variable and fixed is as follows: Line Item Description Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs. Required: 1. Determine the…arrow_forward
- Break-even sales under present and proposed conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $188 per unit during the current year. Its income statement is as follows: Line Item Description Amount Amount Sales $188,000,000 Cost of goods sold (100,000,000) Gross profit $88,000,000 Expenses: Selling expenses $16,000,000 Administrative expenses 12,000,000 Total expenses (28,000,000) Operating income $60,000,000 The division of costs between variable and fixed is as follows: Line Item Description Variable Fixed Cost of goods sold 70% 30% Selling expenses 75% 25% Administrative expenses 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,280,000 in yearly sales. The expansion will increase fixed costs by $5,000,000 but will not affect the relationship between sales and variable costs. 5. Determine the amount of…arrow_forwardBreak-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units at a price of $186 per unit during the current year. Its income statement is as follows: Sales $186,000,000 Cost of goods sold (99,000,000) Gross profit $87,000,000 Expenses: Selling expenses $14,000,000 Administrative expenses 12,400,000 Total expenses (26,400,000) $60,600,000 Operating income The division of costs between variable and fixed is as follows: Variable Fixed 70% 30% Cost of goods sold 75% 25% Selling expenses Administrative 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,009 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will nor affect the relatiorship bet veen sales and variable costs, expenses Nexarrow_forwardBreak-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 135,300 units at a price of $72 per unit during the current year. Its income statement is as follows: Sales $9,741,600 Cost of goods sold 3,456,000 Gross profit $6,285,600 Expenses: Selling expenses $1,728,000 Administrative expenses 1,032,000 Total expenses 2,760,000 Income from operations $3,525,600 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50% Administrative 30% 70% expenses Management is considering a plant expansion program for the following year that will permit an increase of $792,000 in yearly sales. The expansion will increase fixed costs by $105,600, 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 aurrent year. Total variable costs Total fixed costs 2. Determine (a) the unit variable cost…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
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