Whittier Company plans to sell 1,000 mowers at $400 each in the coming year. Total variable expense per unit is $325. Total fixed expense is $45,000. Required: 1. Calculate the sales revenue and units that Whittier Company must make to break even. 2. Check your answer by preparing a contribution margin income statement based on the break-even point calculated. 3. Find the new break units and sales even under the following conditions i. sales price increase by 25 % ii. variable expenses reduced by $25 iii. Fixed cost has increased by 20 %
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
[Question 2]
Whittier Company plans to sell 1,000 mowers at $400 each in the coming year.
Total variable expense per unit is $325. Total fixed expense is $45,000.
Required:
1. Calculate the sales revenue and units that Whittier Company must make to break
even.
2. Check your answer by preparing a contribution margin income statement
based on the break-even point calculated.
3. Find the new break units and sales even under the following conditions
i. sales price increase by 25 %
ii. variable expenses reduced by $25
iii. Fixed cost has increased by 20 %
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
