Valencia Manufacturing Company manufactures and sells musical gadgets. You have just begun your summer internship at Valencia Manufacturing. To expand sales, the business is considering paying a commission to its sales team. You have been asked to compute 1) the new break-even sales figure, and 2) the operating profit if sales increase by 10% under the new sales commission plan. She is confident that you can handle the task, because you learned CVP analysis in your accounting class. The following data was obtained: Selling price per unit $200 Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Production/Sales 6,000 Units After collecting your data, you performed your analysis and submitted a memo to your manager, who was very pleased with the work done. Your report indicated that the new sales commission plan would result in a significant increase in operating income but only a small increase in break-even sales. A few days after, you realized that you made an error in the CVP analysis, as the sales personnel’s $88,000 salaries were inadvertently left out and you therefore did not include this fixed marketing cost in your computations. You are not sure what to do, as y
Valencia Manufacturing Company manufactures and sells musical gadgets. You have just begun your
summer internship at Valencia Manufacturing. To expand sales, the business is considering paying a
commission to its sales team. You have been asked to compute 1) the new break-even sales figure, and 2) the
operating profit if sales increase by 10% under the new sales commission plan. She is confident that you can
handle the task, because you learned CVP analysis in your accounting class.
The following data was obtained:
Selling price per unit $200
Variable expenses per unit: Direct Material $40
Direct Labour $32
Variable Manufacturing
Fixed expenses: Fixed Manufacturing Overhead $190,000
Fixed Selling Costs $115,000
Fixed Administrative Costs $135,000
Production/Sales 6,000 Units
After collecting your data, you performed your analysis and submitted a memo to your manager, who was very
pleased with the work done. Your report indicated that the new sales commission plan would result in a
significant increase in operating income but only a small increase in break-even sales.
A few days after, you realized that you made an error in the CVP analysis, as the sales personnel’s $88,000
salaries were inadvertently left out and you therefore did not include this fixed marketing cost in your
computations. You are not sure what to do, as y
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