Survey of Accounting (Accounting I)
8th Edition
ISBN: 9781305961883
Author: Carl Warren
Publisher: Cengage Learning
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Textbook Question
Chapter 11, Problem 11.2.6P
Break-even sales under present and proposed conditions
Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows:
The division of costs between fixed and variable is as follows:
Management is considering a plant expansion program that will permit an increase of $8,631,000 (35.000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs.
Instructions
Determine the maximum operating income possible with the expanded plant.
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Astro Company sold 26,500 units of its only product and reported income of $246,000 for the current year. During a
planning session for next year's activities, the production manager notes that variable costs can be reduced 60% by
installing a machine that automates several operations. To obtain these savings, the company must increase its annual
fixed costs by $150,000. Total units sold and the selling price per unit will not change.
ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
Sales ($50 per unit)
Variable costs ($35 per unit).
Contribution margin
Fixed costs
Income
ASTRO COMPANY
Contribution Margin Income Statement
For Year Ended December 31
2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume
sales are $1,325,000. (Do not round intermediate calculations. Round your answers to the…
Delsing Canning Company is considering an expansion of its facilities. Its current income statement is as follows: Sales $ 6,300,000 Variable costs (50% of sales) 3, 150,000 Fixed costs 1,930, 000
Earnings before interest and taxes (EBIT) $ 1,220, 000 Interest (10% cost) 460,000 Earnings before taxes (EBT) $760,000 Tax (35 %) 266, 000 Earnings after taxes (EAT) $ 494, 000 Shares of
common stock 330, 000 Earnings per share $ 1.50 The company is currently financed with 50 percent debt and 50 percent equity (common stock, par value of $10). In order to expand the facilities,
Mr. Delsing estimates a need for $3.3 million in additional financing. His investment banker has laid out three plans for him to consider: Sell $3.3 million of debt at 9 percent. Sell $3.3 million of
common stock at $15 per share. Sell $1.65 million of debt at 8 percent and $1.65 million of common stock at $20 per share. Variable costs are expected to stay at 50 percent of sales, while fixed
expenses will increase to…
Operating Income of $220,000 in 2019, when production was 3,000 units
Variable expenses per unit: Direct Material $58Direct Labour $74Variable Manufacturing Overhead $48Fixed expenses: Fixed Manufacturing Overhead $215,000Fixed Selling Costs $65,000Fixed Administrative Costs $160,000
Briefly explain the impact of each of the following scenarios on the break-even point and the margin ofsafety: Increase in sales volumeIncrease in total fixed costs Increase in selling price per unitDecrease in variable costs per unit
Chapter 11 Solutions
Survey of Accounting (Accounting I)
Ch. 11 - Which of the following statements describes...Ch. 11 - If sales are $500,000, variable costs are...Ch. 11 - If the unit selling price is $16. the unit...Ch. 11 - Based on the data presented in Question 3, how...Ch. 11 - Prob. 5SEQCh. 11 - Describe how total variable costs and unit...Ch. 11 - How would each of the following costs be...Ch. 11 - Describe the behavior of (a) total fixed costs and...Ch. 11 - How would each of the following costs be...Ch. 11 - In cost analyses, how arc mixed costs treated?
Ch. 11 - Which of the following graphs illustrates how...Ch. 11 - Which of the following graphs illustrates how unit...Ch. 11 - Which of the following graphs best illustrates...Ch. 11 - In applying the high-low method of Cost...Ch. 11 - Prob. 10CDQCh. 11 - Prob. 11CDQCh. 11 - Prob. 12CDQCh. 11 - If insurance rates are increased, what effect will...Ch. 11 - Prob. 14CDQCh. 11 - The reliability of cost-volume-profit (CVP)...Ch. 11 - How does the sales mix affect the calculation of...Ch. 11 - Prob. 17CDQCh. 11 - Classify costs Following is a list of various...Ch. 11 - Identify cost graphs The following cost graphs...Ch. 11 - Prob. 11.3ECh. 11 - Identify activity bases From the following list of...Ch. 11 - Identify fixed and variable costs Intuit Inc....Ch. 11 - Relevant range and fixed and variable costs Third...Ch. 11 - High-low method Liberty Inc. has decided to use...Ch. 11 - High-low method for service company Miss River...Ch. 11 - Contribution margin ratio a. Matzinger Company...Ch. 11 - Contribution margin and contribution margin ratio...Ch. 11 - Break-even sales and sales to realize operating...Ch. 11 - Prob. 11.12ECh. 11 - Prob. 11.13ECh. 11 - Break-even analysis The Garden Club of Palm...Ch. 11 - Break-even analysis Media outlets such as ESPN and...Ch. 11 - Prob. 11.16ECh. 11 - Prob. 11.17ECh. 11 - Prob. 11.18ECh. 11 - Prob. 11.19ECh. 11 - Prob. 11.20ECh. 11 - Break-even sales and sales mix for a service...Ch. 11 - Operating leverage SunRise Inc. and SunSet Inc....Ch. 11 - Classify costs Peak Apparel Co. manufactures a...Ch. 11 - Break-even sales under present and proposed...Ch. 11 - Prob. 11.2.2PCh. 11 - Prob. 11.2.3PCh. 11 - Prob. 11.2.4PCh. 11 - Prob. 11.2.5PCh. 11 - Break-even sales under present and proposed...Ch. 11 - Prob. 11.2.7PCh. 11 - Prob. 11.2.8PCh. 11 - Break-even sales and cost-volume-profit graph For...Ch. 11 - Prob. 11.3.2PCh. 11 - Break-even sales and cost-volume-profit graph For...Ch. 11 - Prob. 11.3.4PCh. 11 - Prob. 11.4.1PCh. 11 - Prob. 11.4.2PCh. 11 - Prob. 11.4.3PCh. 11 - Prob. 11.4.4PCh. 11 - Prob. 11.5.1PCh. 11 - Prob. 11.5.2PCh. 11 - Sales mix and break-even sales Data related to the...Ch. 11 - Prob. 11.5.4PCh. 11 - Prob. 11.5.5PCh. 11 - Contribution margin, break-even sales,...Ch. 11 - Contribution margin, break-even sales,...Ch. 11 - Contribution margin, break-even sales,...Ch. 11 - Contribution margin, break-even sales,...Ch. 11 - Contribution margin, break-even sales,...Ch. 11 - Margin of safety a. If Go-Go Buggies Company, with...Ch. 11 - Prob. 11.2MBACh. 11 - Margin of safety Use the data from E11-12 and...Ch. 11 - Margin of safety Use the data from E11-12 and...Ch. 11 - Sales mix and margin of safety Use the data from...Ch. 11 - Prob. 11.4.2MBACh. 11 - Prob. 11.4.3MBACh. 11 - Margin of safety Using the data from P11-2,...Ch. 11 - Prob. 11.5.2MBACh. 11 - Margin of safety Using the data from P11-6....Ch. 11 - Prob. 11.6.2MBACh. 11 - Prob. 11.6.3MBACh. 11 - Prob. 11.1CCh. 11 - Break-even sales, contribution margin "Every...Ch. 11 - Break-even analysis Aquarius Games Inc. has...Ch. 11 - Variable costs and activity bases in decision...Ch. 11 - Variable costs and activity bases in decision...Ch. 11 - Prob. 11.6C
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- Break-even sales under present and proposed conditions Kearney Company, operating at full capacity, sold 400,000 units at a price of $246.60 per unit during 20Y5. Its income statement for 20Y5 is as follows: The division of costs between fixed and variable is as follows: Management is considering a plant expansion program that will permit an increase of $8,631,000 (35.000 units at $246.60) in yearly sales. The expansion will increase fixed costs by $3,600,000 but will not affect the relationship between sales and variable costs. Instructions Determine for 20Y5 the total fixed costs and the total variable costs.arrow_forwardGelbart Company manufactures gas grills. Fixed costs amount to 16,335,000 per year. Variable costs per gas grill are 225, and the average price per gas grill is 600. Required: 1. How many gas grills must Gelbart Company sell to break even? 2. If Gelbart Company sells 46,775 gas grills in a year, what is the operating income? 3. If Gelbart Companys variable costs increase to 240 per grill while the price and fixed costs remain unchanged, what is the new break-even point?arrow_forwardBolger 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.arrow_forward
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