3. Problem series (55 points) 3.1. Rosenthal Manufacturing produces and sells three kinds of products: basic, basic plus and premium based on the main material. Information regarding its three models is shown below: Basic Basic Plus Premium Unit 60,000 60,000 80,000 sales mixed 30% 30% 40% Variable cost percentage 25% 30% 35% 2017 is its bad year with a loss for the first time in its history. The company's income statement showed the following results from selling all three products: net sales $2,000,000; total cost and expenses $2,150,000 and net loss $150,000. Costs and expenses consisted of the following: Total Variable Fixed Cost of goods sold 1,225,000 S925,000 S300,000 Selling expenses 625,000 375,000 250,000 Administrative expenses 300,000 100,000 200,000 Total $2,150,000 $1,400,000 $750,000 Management is considering the following independent alternatives for 2018 1. Increase units selling price 30% with no change in cost and expenses, 2. Change the compensation of sales persons from fixed annual salaries totaling $170,000 to total salaries of $50,000 plus a 6% commission on net sales. 3. Purchased new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 40:60. Instructions 1. Compute the break-even point in dollars and beak-even point in units for 2018 2. Compute the break-even point in dollars under each of the alternative courses of action. Which course of action do you recommend? 3. If sales increase by 10,000 units (with same sale mixed rate), by how much should net operating income increase? 4. How many units would the company have to sell to attain the target profit of $150,000? 5. What is the company's margin of safety in dollars? 3.2. Buncombe Company manufactures sails for sailboats. The company has the capacity to produce 2,500 sails per year, but is currently producing and selling 2,000 sails per year. The following information relates to current production: Sale price per unit $1,500 Variable costs per unit: Manufacturing $550 Marketing and administrative $250 Total fixed costs: Manufacturing $540,000 Marketing and administrative $280.000 1) If a special sales order is accepted for 500 sails at a price of $1200 per unit, and fixed costs remain unchanged, how would operating income be affected? Assume regular sales are not affected by the special order. 3/4 Full name: Student ID 2) If a special sales order is accepted for 300 sails at a price of $800 per unit, fixed costs remain unchanged, and there are no additional variable marketing and administrative costs for this order, how would operating income be affected? Assume regular sales are not affected by the special order. 3) If a special sales order is accepted for 250 sails at a price of $700 per unit, fixed costs increase by $10,000, and variable marketing and administrative costs for that order decrease by $50 per unit, how would operating income be affected? Assume regular sales are not affected by the special order
