Problem 3-54 (Algo) CVP Analysis and Price Changes (LO 3-1)Littlefield Partners produce a part sold to agricultural equipment suppliers. For the last year (Year 1), the price, costs, and volume of the part were as follows:Unit price$ 80 Unit variable cost$ 60 Annual fixed cost$ 3,220,000 Sales volume232,200unitsManagers at Littlefield believe that next year (Year 2), conditions in the industry will result in lower prices, both for the part they sell and the materials they purchase. Their best estimates at this time are that the selling price will decline by 10 percent while the unit variable cost will decline by 5 percent, taking into account the changes in both materials and labor. They believe that fixed costs will remain the same. Required:a. What was the break-even volume in number of units last year (Year 1)?b. Assume that the managers estimates are correct for Year 2. How many units would have to be sold in Year 2 to earn the sameoperating profits as earned in Year 1?c. Assume that the managers' estimates on price and unit variable costs are correct for Year 2, but they are uncertain about fixedcosts. By how much would fixed costs have to change (in amount and as a percentage of current fixed costs) if the break-even levelwas to remain the same in Year 2 as in Year 1?Complete this question by entering your answers in the tabs below.Required A Required BX Answer is complete but not entirely correct.Change in fixed costs (in amount)Change in fixed costs (in percent)Required CAssume that the managers' estimates on price and unit variable costs are correct for Year 2, but they are uncertain aboutfixed costs. By how much would fixed costs have to change (in amount and as a percentage of current fixed costs) if thebreak-even level was to remain the same in Year 2 as in Year 1?644,000 X20 X %< Required BRequired C > Required:a. What was the break-even volume in number of units last year (Year 1)?b. Assume that the managers estimates are correct for Year 2. How many units would have to be sold in Year 2 to earn the sameoperating profits as earned in Year 1?c. Assume that the managers' estimates on price and unit variable costs are correct for Year 2, but they are uncertain about fixedcosts. By how much would fixed costs have to change (in amount and as a percentage of current fixed costs) if the break-even levelwas to remain the same in Year 2 as in Year 1?Complete this question by entering your answers in the tabs below.Required A Required BAnswer is complete but not entirely correct.Required CUnits to be sold in Year 2Assume that the managers estimates are correct for Year 2. How many units would have to be sold in Year 2 to earn the sameoperating profits as earned in Year 1?263,000 units< Required ARequired C >

Break even point :— It is the point of production where total cost is equal to total revenue. At…

Answered: Required: a. What was the break-even…

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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Problem 3-54 (Algo) CVP Analysis and Price Changes (LO 3-1)

Littlefield Partners produce a part sold to agricultural equipment suppliers. For the last year (Year 1), the price, costs, and volume of the part were as follows:

Unit price	$ 80
Unit variable cost	$ 60
Annual fixed cost	$ 3,220,000
Sales volume	232,200	units

Managers at Littlefield believe that next year (Year 2), conditions in the industry will result in lower prices, both for the part they sell and the materials they purchase. Their best estimates at this time are that the selling price will decline by 10 percent while the unit variable cost will decline by 5 percent, taking into account the changes in both materials and labor. They believe that fixed costs will remain the same.