Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Belli-Pitt, Inc produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows: Sales $540,000
Belli-Pitt, Inc produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows: Sales $540,000 Less: variable expenses 360,000 Contribution margin 180,000 Less: fixed expenses 120,000 Operating income $ 60,000 The company produced and sold 120,000 kilograms of product during the month. There were no beginning or ending inventories. Required (Each of these are separate situations): Given the present situation, compute: i. The break-even sales in kilograms. The break-even sales in dollars. iii. The sales in kilograms that would be required to produce operating income of $90,000 iv. The margin of safety in dollars. b) Given the present situation, compute the sales in kilograms that would be required to produce after-tax operating income of $90,000, if the tax rate is 20%. c) An important part of processing is performed by a machine that is currently being leased for $20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease. Should the company choose the lease or the royalty plan? II. Under the royalty plan, compute the break-even point in kilograms. Under the royalty plan, compute the break-even point in dollars. IV. Under the royalty plan, determine the sales in kilograms that would be required to produce operating income of $90,000 What are at least two non-financial consideration that should also be included in this decision? I. V
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started