Answered: For each of the following possible…

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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Question

More-Power Company has projected sales of 75,000 regular sanders and 30,000 mini-sanders for next year. The projected income statement is as follows:

	Regular Sander	Mini-Sander	Total
Sales	$3,000,000	$1,800,000	$4,800,000
Less: Variable expenses	1,800,000	900,000	2,700,000
Contribution margin	$1,200,000	$900,000	$2,100,000
Less: Direct fixed expenses	250,000	450,000	700,000
Product margin	$950,000	$450,000	$1,400,000
Less: Common fixed expenses			600,000
Operating income			$800,000

Required:

1. For each of the following possible sales mixes, calculate operating income:

	Regular Sander	Mini-Sander
a.	75,000	37,500
b.	60,000	60,000
c.	30,000	90,000
d.	30,000	60,000

	Operating Income
a.	$_________
b.	$______
c.	$________
d.	$_________

2. Calculate the break-even units for each product for each of the preceding sales mixes. Round the number of break-even packages to two decimal places (and use this figure for intermediate calculations). Round the number of break-even regular and mini-sanders to the nearest whole unit.

	a	b	c	d
Break-even packages	_______	_______	_______	______
Break-even regular sanders	________	_________	________	________
Break-even mini-sanders	_________	_________	_______	________