Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The ompany has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the usiness earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the ear ended December 31, 2020. $50.00 Selling price per unit.. Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead. Fixed Manufacturing Overhead.. Fixed Selling & Administrative Expenses.. Variable selling expense per unit. $7.00 $450,000 $300,000 $10.00 Required:

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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d)
Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin
income statement for the year ended December 31, 2020, detailing the components of total variable
costs and total fixed costs, and clearly showing contribution and net income.
The recession in the economy in 2021 is expected to esult in a reductior of the ".umber of units sold.
Assuming that Greek is operating at normal capacity. y how much can s les decline in units and sales
dollars in 2021 without the company making a loss?
e)
f)
The President of Greek Manufacturing is under pressure from shar holders to increase operating
income by 30% in 2021. Management expects per unit data and total f ed costs to remain the same in
2021. Using the equation method, compute the number of units that ould have to be sold in 2021 to
reach the shareholders desired profit level. Is this a realistic goal?
Transcribed Image Text:d) Assuming sales equal to the normal capacity calculated in a) above, prepare a contribution margin income statement for the year ended December 31, 2020, detailing the components of total variable costs and total fixed costs, and clearly showing contribution and net income. The recession in the economy in 2021 is expected to esult in a reductior of the ".umber of units sold. Assuming that Greek is operating at normal capacity. y how much can s les decline in units and sales dollars in 2021 without the company making a loss? e) f) The President of Greek Manufacturing is under pressure from shar holders to increase operating income by 30% in 2021. Management expects per unit data and total f ed costs to remain the same in 2021. Using the equation method, compute the number of units that ould have to be sold in 2021 to reach the shareholders desired profit level. Is this a realistic goal?
Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The
company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the
business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the
year ended December 31, 2020.
$50.00
Selling price per unit..
Production Costs:
Direct Materials
$10.00
Direct Labour
$8.00
Variable Manufacturing Overhead
Fixed Manufacturing Overhead..
$7.00
$450,000
$300,000
Fixed Selling & Administrative Expenses..
Variable selling expense per unit .
$10.00
Required:
Transcribed Image Text:Greek Manufacturing Company produces and sells a line of product that are sold usually all year round. The company has a maximum production capacity of 100,000 units per year. Operating at normal capacity, the business earned Operating Income of $600,000 in 2020. The following cost data has been prepared for the year ended December 31, 2020. $50.00 Selling price per unit.. Production Costs: Direct Materials $10.00 Direct Labour $8.00 Variable Manufacturing Overhead Fixed Manufacturing Overhead.. $7.00 $450,000 $300,000 Fixed Selling & Administrative Expenses.. Variable selling expense per unit . $10.00 Required:
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