Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: Wes, Im not sure

Cheryl Montoya picked up the phone and called her boss, Wes Chan, the vice president of marketing at Piedmont Fasteners Corporation: Wes, Im not sure how to go about answering the questions that came up at the meeting with the president yesterday. "What's the problem?" The president wanted to know the break-even point for each of the companys products, but I am having trouble figuring them out. Im sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00. Im sure you can handle it, Cheryl. And, by the way, I need your analysis on my desk tomorrow morning at 8:00 sharp in time for the follow-up meeting at 9:00. Velcro Metal Nylon Normal annual sales volume 100,000 214,000 299,000 Unit selling price $ 2.10 $ 2.00 $ 1.50 Variable expense per unit $ 1.00 $ 1.40 $ 1.20 Total fixed expenses are $263,000 per year. All three products are sold in highly competitive markets, so the company is unable to raise its prices without losing unacceptable numbers of customers. The company has an extremely effective lean production system, so there are no beginning or ending work in process or finished goods inventories. Required: 1. What is the companys overall break-even point in dollar sales? (Round CM ratio to 4 decimal places and final answer to the nearest whole dollar.) 2. Of the total fixed expenses of $263,000, $28,380 could be avoided if the Velcro product is dropped, $93,600 if the Metal product is dropped, and $58,500 if the Nylon product is dropped. The remaining fixed expenses of $82,520 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business entirely. a. What is the break-even point in unit sales for each product? (Do not round intermediate calculations.) b. If the company sells exactly the break-even quantity of each product, what will be the overall profit of the company? (Do not round intermediate calculations.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Applications Of Statistical Sampling To Auditing

Authors: Alvin A. Arens, James K. Loebbecke

1st Edition

0130391565, 978-0130391568

More Books

Students also viewed these Accounting questions