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xed costs ariable costs ermine for 2 variable cos

xed costs ariable costs ermine for 2 variable cos

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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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: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
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.
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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