3-25 The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately. Recall the CVP formula: Q(Pu - VCu) - FC = Ol Required: 1. What is the current annual operating income? 2. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: 3. A $0.04 per unit increase in variable costs 4. A 10% increase in fixed costs and a 10% increase in units sold 5. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 6. A 10% increase in fixed costs 7. A 10% increase in selling price and a $20,000 increase in fixed costs
3-25 The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately. Recall the CVP formula: Q(Pu - VCu) - FC = Ol Required: 1. What is the current annual operating income? 2. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: 3. A $0.04 per unit increase in variable costs 4. A 10% increase in fixed costs and a 10% increase in units sold 5. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: 6. A 10% increase in fixed costs 7. A 10% increase in selling price and a $20,000 increase in fixed costs
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:3-25 The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50
per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately.
Recall the CVP formula: Q(Pu - VCu) - FC = Ol Required: 1. What is the current annual operating income?
2. What is the current breakeven point in revenues? Compute the new operating income for each of the
following changes: 3. A $0.04 per unit increase in variable costs 4. A 10% increase in fixed costs and a 10%
increase in units sold 5. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in
variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of
the following changes: 6. A 10% increase in fixed costs 7. A 10% increase in selling price and a $20,000
increase in fixed costs
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