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 $1,500,000. 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 $400,000 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 $400,000 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? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

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 $1,500,000. 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 $400,000 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 $400,000 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? $ 3,750,000 (b) Assuming an income tax rate of 37 percent, what dollar sales volume is currently required to obtain an after-tax profit of $300,000? $ 0 (c) In the absence of income taxes, at what sales volume will both alternatives (automation and outsourcing) provide the same profit? $ 0 Check

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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