Requirement 4. The company is considering an expansion that will increase fixed costs by 30% and variable costs by $2.20 per flag. Compute the new breakeven point in units and in dollars. Should McKnight undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.) (Use the equation approach.)I received help for the first 3 requirements. I know your policy is not to answer more than 3 parts of a question so I've included everything up to requirement 4. McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plusvariable costs of $13.20 per flag. Each flag sells for $22.00.Requirement 1. Use the equation approach to compute the number of flags McKnightmust sell each year to break even.First, select the formula to compute the required sales in units to break evenNet sales revenue – variable costs – fixed costs = target profitRearrange the formula you determined above and compute the required number of flags to break even.The number of flags McKnight must sell each year to break even is 30,000.Based on Bartleby the equation is:Break-even sale in units = fixed costs / contribution margin per unit.Fixed costs = $264,000Flag sells for $22.00 - (variable costs) $13.20 = 8.80Break-even sales in units = $264,000/8.80 = 30,000%3DRequirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needsto earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimalplaces.)Begin by showing the formula and then entering the amounts to calculate the required sales dollars toearn $17,600 in operating income. (Round the required sales in dollars up to the nearest whole dollar.For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.)Contribution margin = contribution margin per unit / sales per unit= $8.80 / $22 X 100%3D= 40%(Fixed costs + target profit) / CM ratio = required sales in dollars($264,000+ $17,600) / 40% = $704,000Requirement 3. Prepare McKnight's contribution margin income statement for the year endedDecember 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.)(Use parentheses or a minus sign for an operating loss.)Sales revenue = $22.00 X 25,000 flags = $550,000Variable costs = $13.20 X 25,000 flags = $330,000Contribution margin = $550,000 - $330,000 = $220,000Fixed costs = $264,000Operating income (loss) = ($44,000)%3D%3D%3D%3D

A company's breakeven point is the point at which its sales exactly cover its expenses. Breakeven point is the point where there will be no profit or loss. Formula Breakeven point = Fixed cost / contribution margin per unit As per expansion plan, Fixed costs increased by 30%Hence, new fixed costs = $264,000 × 130% = $343,200 Variable costs increased by $2.20 per flag.Hence, new variable costs per unit = $13.20 + $2.20 = $15.40 Let the number of units sold be 'X' New break even point in units = (Selling price per unit × Number of products sold) - (Variable cost per unit × Number of products sold) - Fixed costs= $22X - $15.40X - $343,200= $6.60X = $343,200X = $343,200/ $6.60 = 52,000 New break even point is 52,000 flags Break even sales dollars = Fixed costs / *Contribution margin $343,200/ 30% = $1,144,000 Sales dollars to break even $1,144,000 *[Contribution margin = Contribution per unit (Selling price per unit - Variable cost per unit) / Net sales per unit= $6.60 / $22 = 30%] alternatively, find out breakeven point in units simply using the formula Breakeven point = Fixed cost / contribution margin per unit = 343,200/6.6 = 52000 units. Should McKnight undertake the expansion? McKnight should only undertake the expansion if expected profits from expansion are greater than expected costs

Business

Accounting

McKnight Company sells flags with team logos. McKnight has fixed costs of $264,000 per year plus variable costs of $13.20 per flag. Each flag sells for $22.00. Requirement 1. Use the equation approach to compute the number of flags McKnight must sell each year to break even. First, select the formula to compute the required sales in units to break even Net sales revenue – variable costs – fixed costs = target profit Rearrange the formula you determined above and compute the required number of flags to break even. The number of flags McKnight must sell each year to break even is 30,000. Based on Bartleby the equation is: Break-even sale in units = fixed costs / contribution margin per unit. Fixed costs = $264,000 %3D Flag sells for $22.00 - (variable costs) $13.20 = 8.80 Break-even sales in units = $264,000 /8.80 = 30,000 %3D %3D Requirement 2. Use the contribution margin ratio approach to compute the dollar sales McKnight needs to earn $17,600 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $17,600 in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.) Contribution margin = contribution margin per unit / sales per unit = $8.80 / $22 X 100 %3D %3D = 40% (Fixed costs + target profit) / CM ratio = required sales in dollars ($264,000 + $17,600) / 40% = $704,000 Requirement 3. Prepare McKnight's contribution margin income statement for the year ended December 31, 2018, for sales of 25,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.) Sales revenue = $22.00 X 25,000 flags = $550,000 Variable costs = $13.20 X 25,000 flags = $330,000 Contribution margin = $550,000 - $330,000 = $220,000 Fixed costs = $264,000 Operating income (loss) = ($44,000) %3D %3D %3D