Chloe Enterprises operates a single-product entity. Data relating to the product for 2016 were as follows. Annual volume 32 000 units Selling price per unit $ 60 Variable manufacturing cost per unit 28 Annual fixed manufacturing costs 120 000 Variable marketing and distribution costs per unit 12 Annual fixed non-manufacturing costs 360 000 Required Calculate the break-even in both dollars and units for 2016 Calculate the margin of safety in both units and sales dollars Calculate the profit achieved in 2016 given the annual volume of 32 000 units

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Chloe Enterprises operates a single-product entity. Data relating to the product for 2016 were as follows.

Annual volume

32 000 units

Selling price per unit

$ 60

Variable manufacturing cost per unit

28

Annual fixed manufacturing costs

120 000

Variable marketing and distribution costs per unit

12

Annual fixed non-manufacturing costs

360 000

Required

  1. Calculate the break-even in both dollars and units for 2016
  2. Calculate the margin of safety in both units and sales dollars
  3. Calculate the profit achieved in 2016 given the annual volume of 32 000 units
  4. Changes in marketing strategy are planned for 2017. This would increase variable marketing and distribution costs by $4 per unit, and reduce fixed non- manufacturing costs by $80 000 per year. Calculate the units that would need to be sold in 2017 to achieve the same profit as in 2016
  5. Would you recommend the change? Explain.
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