Q1. A company has direct production costs equal to 57.74 percent of total annual sales, and fixed charges, overhead, and general expenses equal to 0.29. If management proposes to increase present annual sales of 4.5 million by 29.4 percent with a 15.33 percent increase in fixed charges, overhead, and general expenses. Estimate a) Annual sales amount that is required to provide the same gross earnings as the present plant operation? b) Net profit if the expanded plant were operated at full capacity with an income tax on gross earnings of 35 percent? c) Net profit for the enlarged plant if total annual sales remained at 4.5 million? d) Net profit for the enlarged plant if the total annual sales actually decreased by 100,000?
Q1. A company has direct production costs equal to 57.74 percent of total annual sales, and fixed charges, overhead, and general expenses equal to 0.29. If management proposes to increase present annual sales of 4.5 million by 29.4 percent with a 15.33 percent increase in fixed charges, overhead, and general expenses. Estimate a) Annual sales amount that is required to provide the same gross earnings as the present plant operation? b) Net profit if the expanded plant were operated at full capacity with an income tax on gross earnings of 35 percent? c) Net profit for the enlarged plant if total annual sales remained at 4.5 million? d) Net profit for the enlarged plant if the total annual sales actually decreased by 100,000?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Q1. A company has direct production costs equal to 57.74 percent of
total annual sales, and fixed charges, overhead, and general
expenses equal to 0.29. If management proposes to increase present
annual sales of 4.5 million by 29.4 percent with a 15.33 percent
increase in fixed charges, overhead, and general expenses.
Estimate
a) Annual sales amount that is required to provide the same gross
earnings as the present plant operation?
b) Net profit if the expanded plant were operated at full capacity with
an income tax on gross earnings of 35 percent?
c) Net profit for the enlarged plant if total annual sales remained at
4.5 million?
d) Net profit for the enlarged plant if the total annual sales actually
decreased by 100,000?
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