an Luis Obispo, California based SLOboards, Inc. manufactures a single line of paddleboards. For the year ended 12.31.21, SLOboards manufactured and sold a total of 1,000 boards. The following information was compiled for 2021 based on the 2021 production and sales volume: Sales Revenue . . . $500,000 Total Variable Costs . . . $200,000 Total Fixed Costs . . . $160,000 SLOboards is considering relocating its operations to Morro Bay, California in 2023. If the company relocates to Morro Bay, the sales price will not change. The variable cost per board in Morro Bay will decrease to $150, but the total annual fixed manufacturing costs will increase by $55,000. Which of the following statements is correct? A. If annual unit sales in 2023 are expected to be less than 1,100, the company should move its operations to Morro Bay. B. SLOboards' 2021 operating income was $85,000. C. If operations are moved to Morro Bay, the annual breakeven point would be 615 units higher than the annual breakeven point in San Luis Obispo. D. If the company relocates to Morro Bay and desires a $205,000 annual target profit, it must generate sales revenue of $600,000 in 2023. E. The Morro Bay cost structure is considered the low operating leverage option for SLOboards' operations.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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San Luis Obispo, California based SLOboards, Inc. manufactures a single line of paddleboards. For the year ended 12.31.21, SLOboards manufactured and sold a total of 1,000 boards. The following information was compiled for 2021 based on the 2021 production and sales volume:

Sales Revenue . . . $500,000

Total Variable Costs . . . $200,000

Total Fixed Costs . . . $160,000

SLOboards is considering relocating its operations to Morro Bay, California in 2023. If the company relocates to Morro Bay, the sales price will not change. The variable cost per board in Morro Bay will decrease to $150, but the total annual fixed manufacturing costs will increase by $55,000. Which of the following statements is correct?

If annual unit sales in 2023 are expected to be less than 1,100, the company should move its operations to Morro Bay.

SLOboards' 2021 operating income was $85,000.

If operations are moved to Morro Bay, the annual breakeven point would be 615 units higher than the annual breakeven point in San Luis Obispo.

If the company relocates to Morro Bay and desires a $205,000 annual target profit, it must generate sales revenue of $600,000 in 2023.

The Morro Bay cost structure is considered the low operating leverage option for SLOboards' operations.

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