Break-Even Sales Under Present and Proposed ConditionsDarby Company, operating at full capacity, sold 118,500 units at a price of $75 per unit during the current year. Its income statement is as follows:Sales$8,887,500Cost of goods sold3,150,000Gross profit$5,737,500Expenses:Selling expenses$1,575,000Administrative expenses950,000Total expenses2,525,000Income from operations$3,212,500The division of costs between variable and fixed is as follows:VariableFixedCost of goods sold60%40%Selling expenses50%50%Administrative70%30%expensesManagement is considering a plant expansion program for the following year that will permit an increase of $825,000 in yearly sales. The expansion will increase fixeccosts by $110,000, but will not affect the relationship between sales and variable costs.Required:1. Determine the total variable costs and the total fixed costs for the current year.Total variable costsTotal fixed costsMacBook ProDIIFB Total fixed costs$.2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year.Unit variable costUnit contribution margin%$43. Compute the break-even sales (units) for the current year.units4. Compute the break-even sales (units) under the proposed program for the following year.units5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $3,212,500 of income from operations that was earned ithe current year.units6. Determine the maximum income from operations possible with the expanded plant.$47. If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?$48. Based on the data given, would you recommend accepting the proposal?a. In favor of the proposal because of the reduction in break-even point.b. In favor of the proposal because of the possibility of increasing income from operations.C. In favor of the proposal because of the increase in break-even point.d. Reject the proposal because if future sales remain at the current level, the income from operations will increase.e. Reject the proposal because the sales necessary to maintain the current income from operations would be below the current year sales.Choose the correct answer.MacBook ProDIIDDF8F9F10F11%24%24%24%24

A mixed cost contains both variable and fixed parts. Variable part of the cost varies as per the…

Answered: arby Company, operating at full…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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2 Trez Company began operations this year. During this year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Income Statement (Absorption Costing) Sales (80,000 units × $45 per unit) $ 3,600,000 Cost of goods sold 2,000,000 Gross profit 1,600,000 Selling and administrative expenses 560,000 Income $ 1,040,000 Additional Information Selling and administrative expenses consist of $400,000 in annual fixed expenses and $2 per unit in variable selling and administrative expenses. The company's product cost of $25 per unit consists of the following. Direct materials $ 4 per unit Direct labor $ 10 per unit Variable overhead $ 4 per unit Fixed overhead ($700,000 / 100,000 units) $ 7 per unit Required:Prepare an income statement for the company under variable costing.
Sales Cost of goods sold Gross profit Expenses: $186,000,000 (102,000,000) $84,000,000 Selling expenses $16,000,000 Administrative expenses 5,200,000 Total expenses (21,200,000) Operating income $62,800,000 The division of costs between variable and fixed is as follows: Cost of goods sold Selling expenses Administrative expenses Variable Fixed 70% 30% 75% 25% 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 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 86,000,000 ✓ 37,700,000 X 2. Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Unit variable cost Unit contribution margin 86 V ✓ 100 3. Compute the break-even sales (units) for the…
North Wood Company reported net sales of $500,000 variable cost of goods sold of $200,000, variable selling and administrative expense of $85,000 fixed manufacturing cost of $105,000, and mixed selling and administrative expenses of $80,000. The contribution margin is
During Heaton Company's first two years of operations, it reported absorption costing net operating income as follows: Year 1 Sales (862 per unit) Year 2 $930,000 $1,550,000 495,000 Cost of goods sold t# $33 per unit) Gross margin 625,000 435,000 725,000 Selling and adninistrative expenses 292.000 322,000 Set operating income $ 143,000 $ 403,000 *$3 per unit variable: $247,000 fixed each year. The company's $33 unit product cost is computed as follows: Dirpet materials Diret labor Variable manufacturing overhead 3 13 Fixed manufacturing overhead (5260,000 20,000 unita) Absorption costing unit product cost Production and cost data for the first two years of operations are Year 1 Year 2 Units produced 20,000 20,000 thits sold 15,000 25,000 Required: 1. Using variable costing, what is the unit product cost for both years? 2. What is the variable costing net operating income in Year 1 and in Year 27 3. Reconcile the absorption costing and the variable costing net operating income figures…
A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $233,300 Cost of goods sold 111,000 Gross profit $122,300 Operating expenses 145,000 Loss from operations $(22,700) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
Darby Company, operating at full capacity, sold 129,600 units at a price of $123 per unit during the current year. Its income statement is as follows: Sales $15,940,800 Cost of goods sold 5,658,000 Gross profit $10,282,800 Expenses: Selling expenses $2,829,000 Administrative expenses 1,681,000 Total expenses 4,510,000 Income from operations $5,772,800 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 $1,476,000 in yearly sales. The expansion will increase fixed costs by $196,800, 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 year. Total variable costs $fill in the blank 1…
Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 83,700 units at a price of $48 per unit during the current year. Its income statement for the current year is as follows: Sales $4,017,600 Cost of goods sold 1,984,000 Gross profit $2,033,600 Expenses: Selling expenses $992,000 Administrative expenses 992,000 Total expenses 1,984,000 Income from operations $49,600 The division of costs between fixed and variable 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 that will permit an increase of $336,000 in yearly sales. The expansion will increase fixed costs by $33,600, but…
Todrick Company is a merchandiser that reported the following information based on 1,000 units sold: Sales $ 300,000 Beginning merchandise inventory $ 20,000 Purchases $ 200,000 Ending merchandise inventory $ 7,000 Fixed selling expense ?question mark Fixed administrative expense $ 12,000 Variable selling expense $ 15,000 Variable administrative expense ?question mark Contribution margin $ 60,000 Net operating income $ 18,000 3. Calculate the selling price per unit. 4. Calculate the variable cost per unit. 5. Calculate the contribution margin per unit.
Whitman Company has just completed its first year of operations. The company's absorption costing income statement for the year follows: Whitman Company Income Statement Sales (42,000 units x $43.60 per unit) Cost of goods sold (42,000 units x $23 per unit) Gross margin Selling and administrative expenses Net operating income $ 1,831, 200 966,000 865,200 483,000 $ 382,200 The company's selling and administrative expenses consist of $315,000 per year in fixed expenses and $4 per unit sold in variable expenses. The $23 unit product cost given above is computed as follows: Direct materials. Direct labor $ 10 4 Variable manufacturing overhead 3 Fixed manufacturing overhead ($276,000 46,000 units) 6 Absorption costing unit product cost $ 23 Required: 1. Redo the company's income statement in the contribution format using variable costing. 2. Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption…
Determine the amount of sales (units) that would be necessary under Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 83,700 units at a price of $48 per unit during the current year. Its income statement for the current year is as follows: Sales $4,017,600 Cost of goods sold 1,984,000 Gross profit $2,033,600 Expenses: Selling expenses $992,000 Administrative expenses 992,000 Total expenses 1,984,000 Income from operations $49,600 The division of costs between fixed and variable 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 that will permit an increase of $336,000 in yearly sales. The expansion will increase fixed costs by $33,600, but…
The following information is available from the accounting records of Wisconsin International Inc.. Sales at 65% of Capacity $89,500 Fixed costs $36,950 Variable costs $28,350 Total costs $65,300 Net Income $24,200 a) Compute the break-even point in sales dollars (round off two the nearest cent) $ b) Compute the break-even point as a percent of capacity. (round off two decimal places) %
Hi-Tek Manufacturing, Incorporated, makes two industrial component parts-B300 and T500. An absorption costing income state for the most recent period is shown below: Hi-Tek Manufacturing, Incorporated Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating loss. Hi-Tek produced and sold 60,300 units of B300 at a price of $20 per unit and 12,500 units of T500 at a price of $40 per unit. The company's traditional cost system allocates manufacturing overhead to products using a plantwide overhead rate and direct labo dollars as the allocation base. Additional information relating to the company's two product lines is shown below: Direct materials Direct labor Manufacturing overhead Cost of goods sold $ 1,706,000 1,221,008 484,992 570,000 $ (85,008) Activity Cost Pool (and Activity Measure) Machining (machine-hours) Setups (setup hours) Product-sustaining (number of products) Other (organization-sustaining costs) Total manufacturing overhead…

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