Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to produce 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.25, and fixed expenses associated with the toy would total $35,000 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. Compute the monthly break-even point for the new toy in units and in total dollar sales. (Do not round intermediate calculations.) Answer is complete and correct. Break-even point in unit sales Break-even point in dollar sales 21,000 units 63,000 2. How many units must be sold each month to make a monthly operating income of $12,000? (Do not round intermediate calculations.) Total units to be sold Answer is complete but not entirely correct. 20,000 units
Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to produce 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.25, and fixed expenses associated with the toy would total $35,000 per month. The company's Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company is able to produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant. Required: 1. Compute the monthly break-even point for the new toy in units and in total dollar sales. (Do not round intermediate calculations.) Answer is complete and correct. Break-even point in unit sales Break-even point in dollar sales 21,000 units 63,000 2. How many units must be sold each month to make a monthly operating income of $12,000? (Do not round intermediate calculations.) Total units to be sold Answer is complete but not entirely correct. 20,000 units
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Neptune Company produces toys and other items for use in beach and resort areas. A small, inflatable toy has come onto the market
that the company is anxious to produce and sell. The new toy will sell for $3 per unit. Enough capacity exists in the company's plant to
produce 16,000 units of the toy each month. Variable expenses to manufacture and sell one unit would be $1.25, and fixed expenses
associated with the toy would total $35,000 per month.
The company's Marketing Department predicts that demand for the new toy will exceed the 16,000 units that the company is able to
produce. Additional manufacturing space can be rented from another company at a fixed expense of $1,000 per month. Variable
expenses in the rented facility would total $1.40 per unit, due to somewhat less efficient operations than in the main plant.
Required:
1. Compute the monthly break-even point for the new toy in units and in total dollar sales. (Do not round intermediate calculations.)
Answer is complete and correct.
Break-even point in unit sales
Break-even point in dollar sales
21,000 units
63,000
2. How many units must be sold each month to make a monthly operating income of $12,000? (Do not round intermediate
calculations.)
Total units to be sold
Answer is complete but not entirely correct.
20,000 units
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