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The condensed income statement for the Peri and Paul partnership for 2022 is as follows. Peri and Paul Company Income Statement For the Year Ended December 31, 2020 $1,200,000 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling Administrative Net loss $300,000 152,500 800,000 400,000 452,500 $(52,500) A cost behavior analysis indicates that 75% of the cost of goods sold are variable and 40% of the selling expenses are variable. Administrative expenses are $92,500 fixed.

The condensed income statement for the Peri and Paul partnership for 2022 is as follows. Peri and Paul Company Income Statement For the Year Ended December 31, 2020 $1,200,000 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling Administrative Net loss $300,000 152,500 800,000 400,000 452,500 $(52,500) A cost behavior analysis indicates that 75% of the cost of goods sold are variable and 40% of the selling expenses are variable. Administrative expenses are $92,500 fixed.

FINANCIAL ACCOUNTING
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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The condensed income statement for the Peri and Paul partnership for 2022 is as follows. Peri and Paul Company Income Statement For the Year Ended December 31, 2020 $1,200,000 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling Administrative Net loss $300,000 152,500 800,000 400,000 452,500 $(52,500) A cost behavior analysis indicates that 75% of the cost of goods sold are variable and 40% of the selling expenses are variable. Administrative expenses are $92,500 fixed.
Transcribed Image Text:The condensed income statement for the Peri and Paul partnership for 2022 is as follows. Peri and Paul Company Income Statement For the Year Ended December 31, 2020 $1,200,000 Sales (240,000 units) Cost of goods sold Gross profit Operating expenses Selling Administrative Net loss $300,000 152,500 800,000 400,000 452,500 $(52,500) A cost behavior analysis indicates that 75% of the cost of goods sold are variable and 40% of the selling expenses are variable. Administrative expenses are $92,500 fixed.
(c) Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri's: (1) increase variable selling expenses to $0.575 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $51,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Paul's proposal and the break-even point in dollars. (Round intermediate calculations to 3 decimal places, e.g. 15.251 and final answers to O decimal places, e.g. 2,520.) Net income Break-even point Amount $ $
Transcribed Image Text:(c) Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri's: (1) increase variable selling expenses to $0.575 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $51,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Paul's proposal and the break-even point in dollars. (Round intermediate calculations to 3 decimal places, e.g. 15.251 and final answers to O decimal places, e.g. 2,520.) Net income Break-even point Amount $ $
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