Question
ABC Company operating at full capacity, sold 80,000 units at aprice of $70.75 per unit during 2008. It's incomestatement for 2008 is as follows. sales
ABC Company operating at full capacity, sold 80,000 units at aprice of $70.75 per unit during 2008. It's incomestatement for 2008 is as follows.
sales 5,660,000
cost of goodssold2,100,000
grossprofit 3,560,000
Expenses:
sellingexpenses 1,500,000
administrativeexpenses900,000
totalexpenses2,400,000
income fromoperatoins1,160,000
The division of costs between fixed and variable is asfollows:
FixedVariable
cost ofsales 50% 50%
sellingexpenses 30% 70%
administrativeexpenses 60% 40%
Managment is considering a plant expansion that will permit anincrease of $884,375 in yearly sales. The expansion willincrease fixed costs by $265,000 but will not affect therelationship between sales and variable costs.
a. determine for 2008 the total fixed costs and the totalvariable costs
b. determine for 2008(a) the unit variable cost and (b) theunit contribution marign.
c. compute the break even sales(units) for 2008
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