xed costs ariable costs ermine for 2 variable cos
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Instructions:
1. Determine for 20Y5 the total fixed costs and the total variable costs.
Total fixed costs
Total variable costs
2. Determine for 20Y5 (a) the unit variable cost and (b) the unit contribution margin.
per unit
per unit
a. Unit variable cost
b. Unit contribution margin
3. Compute the break-even sales (units) for 20Y5.
units
4. Compute the break-even sales (units) under the proposed program.
units
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $4,983,000 of operating income that
was earned in 20Y5.
units
6. Determine the maximum operating income possible with the expanded plant.
7. If the proposal is accepted and sales remain at the 20Y5 level, what will be the operating income or loss for 20Y6?
Income
Transcribed Image Text:Kearney Company, operating at full capacity, sold 139,000 units at a price of $99 per unit during 20Y5. Its income statement for 20Y5 is as follows:
Sales
Cost of goods sold
Gross profit
Expenses:
Selling expenses
Administrative expenses
Total expenses
Operating income
Cost of good sold
Selling expenses
$2,442,000
1,452,000
Administrative expenses
The division of costs between fixed and variable is as follows:
Fixed
Variable
40%
50%
$13,761,000
(4,884,000)
$8,877,000
70%
(3,894,000)
$4,983,000
60%
50%
30%
Management is considering a plant expansion program that will permit an increase of $1,287,000 (13,000 units at $99 per unit) in yearly sales. The
expansion will increase fixed costs by $171,600, but will not affect the relationship between sales and variable costs.
Expert Solution
Step 1
1)
| Total Cost | Fixed Cost in % | Fixed Cost in $ |
Variable Cost in % |
Variable Cost in $ |
|
| Cost of Goods Sold | $ 48,84,000 | 40% | $ 19,53,600 | 60% | $ 29,30,400 |
| Selling Expenses | $ 24,42,000 | 50% | $ 12,21,000 | 50% | $ 12,21,000 |
| Administrative Expenses | $ 14,52,000 | 70% | $ 10,16,400 | 30% | $ 4,35,600 |
| Total | $ 41,91,000 | $ 45,87,000 |
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