OProblem Set: Module 41. EX.06.012. PR.06.02A ALGO3. BE.06.02.ALGO4. BE.06.03.ALGOcengagenow.com●Portmann Company, operating at full capacity, sold 1,000,000units at a price of $188 per unit during the current year. Itsincome statement is as follows:SalesCost of goods soldGross profitExpenses:Selling expensesAdministrative expensesTotal expensesCost of goods soldSelling expensesAdministrative expensesTotal variable costsTotal fixed costs$16,000,00010,600,000Operating incomeThe division of costs between variable and fixed is as follows:FixedUnit variable costUnit contribution margin+ 40Variable70%75%50%$188,000,000(101,000,000)$87,000,000(26,600,000)$60,400,000Management is considering a plant expansion program for thefollowing year that will permit an increase of $11,280,000 inyearly sales. The expansion will increase fixed costs by$5,000,000 but will not affect the relationship between salesand variable costs.Required:1. Determine the total variable costs and the total fixed costsfor the current year.units30%25%50%2. Determine (a) the unit variable cost and (b) the unitcontribution margin for the current year.3. Compute the break-even sales (units) for the current year.units4. Compute the break-even sales (units) under the proposedprogram for the following year.units5. Determine the amount of sales (units) that would benecessary under the proposed program to realize the$60,400,000 of operating income that was earned in thecurrent year.6. Determine the maximum operating income possible withthe expanded plant.7. If the proposal is accepted and sales remain at the currentlevel, what will the operating income or loss be for thefollowing year?СО

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Answered: Portmann Company, operating at full…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $233,300 Cost of goods sold 111,000 Gross profit $122,300 Operating expenses 145,000 Loss from operations $(22,700) It is estimated that 12% of the cost of goods sold represents fixed factory overhead costs and that 23% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
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A condensed income statement by product line for British Beverage Inc. indicated the following for Royal Cola for the past year: Sales $236,800 Cost of goods sold 109,000 Gross profit $127,800 Operating expenses 145,000 Loss from operations $(17,200) It is estimated that 14% of the cost of goods sold represents fixed factory overhead costs and that 19% of the operating expenses are fixed. Since Royal Cola is only one of many products, the fixed costs will not be materially affected if the product is discontinued. a. Prepare a differential analysis, dated March 3, to determine whether Royal Cola should be continued (Alternative 1) or discontinued (Alternative 2). If an amount is zero, enter zero "0". Use a minus sign to indicate a loss. Differential Analysis Continue Royal Cola (Alt. 1) or Discontinue Royal Cola (Alt. 2) January 21 Continue RoyalCola (Alternative 1) Discontinue RoyalCola (Alternative 2) Differential Effecton Income(Alternative 2)…
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