International Data Systems' information on revenue and costs is relevant only up to a sales volume of 108,000 units. After 108,000 units, the market becomes saturated and the price per unit falls from $20 to $11.80. Also, there are cost overruns at a production volume of over 108,000 units, and the variable cost per unit goes up from $10 to $10.25. Fixed costs remain the same at $58,000. a. Compute operating income at 108,000 units. b. Compute operating income at 208,000 units.

International Data Systems' information on revenue and costs is relevant only up to a sales volume of 108,000 units. After 108,000 units, the market becomes saturated and the price per unit falls from $20 to $11.80. Also, there are cost overruns at a production volume of over 108,000 units, and the variable cost per unit goes up from $10 to $10.25. Fixed costs remain the same at $58,000. a. Compute operating income at 108,000 units. b. Compute operating income at 208,000 units.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
International Data Systems' information on revenue and costs is relevant only up to a sales volume of 121,000 units. After 121,000 units, the market becomes saturated and the price per unit falls from $10.00 to $6.80. Also, there are cost overruns at a production volume of over 121,000 units, and variable cost per unit goes up from $5.00 to $5.25. Fixed costs remain the same at $71,000. a. Compute operating income at 121,000 units. b. Compute operating income at 221,000 units.
International Data Systems' information on revenue and costs is relevant only up to a sales volume of 123,000 units. After 123,000 units, the market becomes saturated and the price per unit falls from $14.00 to $8.80. Also, there are cost overruns at a production volume of over 123,000 units, and variable cost per unit goes up from $7.00 to $7.50. Fixed costs remain the same at $73,000. a. Compute operating income at 123,000 units. Operating income b. Compute operating income at 223,000 units. Operating income
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If total fixed cost of company increases from $250,000 to $300,000, variable cost remainsunchanged at $2 per unit, and selling price increases from $10 to $11.50. How the above changes will affect break-even point in units? A)The break-even point in units will decrease. B)None of the other. C)The break-even point in units will increase. D)The break-even point in units will remain same.
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