CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,200,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ (b) Assuming an income tax rate of 38 percent, what dollar sales volume is currently required to obtain an after-tax profit of $600,000? $ (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $
CVP Analysis and Special Decisions Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed costs totaled $1,200,000. Sweet Grove is evaluating two alternatives designed to enhance profitability. • One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales. • Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales. Round your answers to the nearest whole number. (a) What is the current break-even point in sales dollars? $ (b) Assuming an income tax rate of 38 percent, what dollar sales volume is currently required to obtain an after-tax profit of $600,000? $ (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter14: The Balanced Scorecard And Corporate Social Responsibility
Section: Chapter Questions
Problem 2PB: Strategic initiatives and CSR Blue Skies Inc. is a retail gardening company that is piloting a new...
Related questions
Question
M.
![CVP Analysis and Special Decisions
Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed
costs totaled $1,200,000. Sweet Grove is evaluating two alternatives designed to enhance profitability.
• One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales.
• Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales.
Round your answers to the nearest whole number.
(a) What is the current break-even point in sales dollars?
$
(b) Assuming an income tax rate of 38 percent, what dollar sales volume is currently required to obtain an after-tax profit of $600,000?
(c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit?
$](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7f160f1b-d125-4cf2-9b01-27d1eef1b8b8%2F313ad39c-69b3-4355-a223-e8492c55ec34%2Fewq6v7q_processed.jpeg&w=3840&q=75)
Transcribed Image Text:CVP Analysis and Special Decisions
Sweet Grove Citrus Company buys a variety of citrus fruit from growers and then processes the fruit into a product line of fresh fruit, juices, and fruit flavorings. The most recent year's sales revenue was $4,200,000. Variable costs were 60 percent of sales and fixed
costs totaled $1,200,000. Sweet Grove is evaluating two alternatives designed to enhance profitability.
• One staff member has proposed that Sweet Grove purchase more automated processing equipment. This strategy would increase fixed costs by $300,000 but decrease variable costs to 54 percent of sales.
• Another staff member has suggested that Sweet Grove rely more on outsourcing for fruit processing. This would reduce fixed costs by $300,000 but increase variable costs to 65 percent of sales.
Round your answers to the nearest whole number.
(a) What is the current break-even point in sales dollars?
$
(b) Assuming an income tax rate of 38 percent, what dollar sales volume is currently required to obtain an after-tax profit of $600,000?
(c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit?
$
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Essentials of Business Analytics (MindTap Course …](https://www.bartleby.com/isbn_cover_images/9781305627734/9781305627734_smallCoverImage.gif)
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Cornerstones of Cost Management (Cornerstones Ser…](https://www.bartleby.com/isbn_cover_images/9781305970663/9781305970663_smallCoverImage.gif)
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
![Essentials of Business Analytics (MindTap Course …](https://www.bartleby.com/isbn_cover_images/9781305627734/9781305627734_smallCoverImage.gif)
Essentials of Business Analytics (MindTap Course …
Statistics
ISBN:
9781305627734
Author:
Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:
Cengage Learning