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
Management believes it can sell a new product for $6.50. The fixed costs of production are estimated to be $5,500, and the variable costs are $2.50 a unit. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Round your answers to the nearest dollar. Enter zero if necessary. Use a minus sign to enter losses, if any. Quantity Total Revenue Variable Costs Fixed Costs Total Costs Profits (Losses) 0 $ $ $ $ $ 500 $ $ $ $ $ 1,000 $ $ $ $ $ 1,500 $ $ $ $ $ 2,000 $ $ $ $ $ 2,500 $ $ $ $ $ 3,000 $ $ $ $ $ Determine the break-even level using the above table and use the Exhibit 19.5 to confirm the break-even level of output. Round your answers for the break-even level to the nearest whole number. Round your answers for the fixed costs, variable costs, total costs,…
Franklin Producers sells its core product for $9 per unit and has variable costs of $7 per unit. Total fixed costs are $26,000. Suppose variable costs increase by 20% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units? O A. Decrease from 1,625 units to 1,495 units O B. Decrease from 3,714.2857 units to 3,096 units O C. Increase from 13,000 units to 43,334 units O D. Decrease from 13,000 units to 2,364 units
Spice Inc.'s unit selling price is $49, unit variable costs are $39, fixed costs are $120,000, and current sales are 9,100 units. How much will income from operations change if sales increase by 5,400 units? DO NOT GIVE SOLUTION IN IMAGE FORMAT
Walker Company sells its product for $10 per unit and has variable costs of $3 per unit. Total fixed costs are $91,000. Suppose variable costs increase by 10% due to an increase in the cost of direct materials. What will be the effect on the breakeven point in units? (Round answer up to the nearest whole unit) A. Decrease from 30,333 units to 27.576 units B. Decrease from 7,000 units to 6,843, units OC. Decrease from 13,000 units to 1,941 units OD. Increase from 13.000 units to 13.583 units
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.
Menlo Company manufactures and sells a single product. The company’s revenue and expenses for the last quarter follow: Total Per unit Revenune 450000 30 Less variable expenses 180000 12 Contribution margin 270000 18 Less fixed expenses 216000 Profit 54000 1 What is the quarterly break-even point in units sold and in revenue? 2 Without resorting to computations, what is the total contribution margin at the break-even point? 3 How many units would have to be sold each quarter to earn a target profit of £90,000? Use the unit contribution method. Verify your answer by preparing a contribution statement of profit or loss at the target level of revenue. 4 Refer to the original data. Compute the company’s margin of safety in both pound and percentage terms. 5 What is the company’s CM ratio? If revenue increase by £50,000 per quarter and there is no change in fixed expenses, by how much would you expect quarterly profit to increase? (Do not prepare a…
In a cost-volume-profit analysis, explain what happens at the break-even point and why companies do not want to remain at the break-even point. Marlin Motors sells a single product with a selling price of $400 with variable costs per unit of $160. The company’s monthly fixed expenses are $36,000. A. What is the company’s break-even point in units? B. What is the company’s break-even point in dollars? C. Prepare a contribution margin income statement for the month of November when they will sell 130 units. D. How many units will Marlin need to sell in order to realize a target profit of $48,000? E. What dollar sales will Marlin need to generate in order to realize a target profit of $48,000? F. Construct a contribution margin income statement for the month of February that reflects $200,000 in sales revenue for Marlin Motors.
You have the following data for product X: sales revenue $12,000, variable costs $8,000, allocated fixed costs $2,000. If you drop product X in the long term, total profit will: increase by $2,000 remain the same decrease by $2,000 O increase by $4,000 decrease by $4,000
Loessing Compan produced and sold 12,000 units last year with sales price of $45 per unit and unit variable cost of $20. Fixed costs totaled $250,000. In the coming year, Loessing expects price to decrease by ten percent. Neither unit variable cost nor fixed costs can be changed. If Loessing wants to maintain the same level of income, what will the new level of production need to be?