Compute the break-even point in units.

Question

Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $220,800. An internally prepared report summarizes the Payroll Department’s annual operating costs as follows: Supplies $ 30,800 Payroll clerks’ salaries 120,800 Payroll supervisor’s salary 58,800 Payroll employee training expenses 10,800 Depreciation of equipment 20,800 Allocated share of common building operating costs 15,800 Allocated share of common administrative overhead 28,800 Total annual operating cost $ 286,600 EDC currently rents overflow office space for $36,800 per year. If the company closes its Payroll Department, the employees occupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated with no penalty. If the Payroll Department is outsourced the payroll clerks will not be retained; however, the supervisor would be transferred to the company’s Human…

Answer 1

Question

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

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Express Delivery Company (EDC) is considering outsourcing its Payroll Department to a payroll processing company for an annual fee of $220,800. An internally prepared report summarizes the Payroll Department’s annual operating costs as follows: Supplies $ 30,800 Payroll clerks’ salaries 120,800 Payroll supervisor’s salary 58,800 Payroll employee training expenses 10,800 Depreciation of equipment 20,800 Allocated share of common building operating costs 15,800 Allocated share of common administrative overhead 28,800 Total annual operating cost $ 286,600 EDC currently rents overflow office space for $36,800 per year. If the company closes its Payroll Department, the employees occupying the rented office space could be brought in-house and the lease agreement on the rented space could be terminated with no penalty. If the Payroll Department is outsourced the payroll clerks will not be retained; however, the supervisor would be transferred to the company’s Human…

Thalassines Kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump follows: Thalassines Kataskeves, S.A. Income Statement—Bilge Pump For the Quarter Ended March 31 Sales $ 410,000 Variable expenses: Variable manufacturing expenses $ 123,000 Sales commissions 50,000 Shipping 21,000 Total variable expenses 194,000 Contribution margin 216,000 Fixed expenses: Advertising (for the bilge pump product line) 27,000 Depreciation of equipment (no resale value) 120,000 General factory overhead 38,000* Salary of product-line manager 113,000 Insurance on inventories 5,000 Purchasing department 49,000† Total fixed expenses 352,000 Net operating loss $ (136,000) *Common costs allocated on the basis of machine-hours. †Common costs allocated on the basis of…

Do companies maintain two sets of depreciation schedules, one for financial reporting and the other one for tax purposes?

Answer 2

Question

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

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Answer 3

Question

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

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Answer 4

Question

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

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Answer 5

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

Answer 6

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

Answer 7

Chapter 16, Problem 12E

1.

To determine

Compute the break-even point in units.

Answer 8

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

Answer 9

2.

To determine

Compute the operating income with 88 jobs and 95 jobs.

Answer 10

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

Answer 11

3.

To determine

Compute the number of units required to generate the after-tax income of $1,200.

Answer 12

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

Answer 13

4.

To determine

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

Answer 14

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Answer 15

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Ch. 16 - Prob. 1DQ Ch. 16 - Describe the difference between the units-sold...Ch. 16 - Define the term break-even point.Ch. 16 - Explain why contribution margin per unit becomes...Ch. 16 - A restaurant owner who had yet to earn a monthly...Ch. 16 - What is the variable cost ratio? The contribution...Ch. 16 - Prob. 7DQ Ch. 16 - Suppose a firm with a contribution margin ratio of...Ch. 16 - Prob. 9DQ Ch. 16 - Explain how CVP analysis developed for single...

Compute the break-even point in units.

Solution Summary: The author calculates the break-even point in units and the operating income with 88 jobs and 95 jobs.

Compute the break-even point in units.

Compute the operating income with 88 jobs and 95 jobs.

Compute the number of units required to generate the after-tax income of $1,200.

Compute the break-even point in units, if the fixed costs increase to $3,400 and the price increases to $75 per job.

Chapter 16 Solutions