Item1

10points

Time Remaining 1 hour 29 minutes 43 seconds

01:29:43

Item 1

Time Remaining 1 hour 29 minutes 43 seconds

01:29:43

The Central Valley Company is a manufacturing firm that produces and sells a single product. The companys revenues and expenses for the last four months are given below.

Central Valley Company Comparative Income Statement
	March			April				May			June
Sales in units		6,200			5,700			7,050			8,400
Sales revenue	$	762,600		$	701,100		$	867,150		$	1,033,200
Less: Cost of goods sold		402,800			378,594			450,918			526,932
Gross margin	$	359,800		$	322,506		$	416,232		$	506,268
Less: Operating expenses
Shipping expense	$	63,900		$	53,600		$	67,400		$	65,000
Advertising expense		88,000			88,000			88,000			88,000
Salaries and commissions		164,400			137,000			167,500			171,500
Insurance expense		15,000			15,000			15,000			15,000
Amortization expense		48,000			48,000			48,000			48,000
Total operating expenses	$	379,300		$	341,600		$	385,900		$	387,500
Net income	$	(19,500	)	$	(19,094	)	$	30,332		$	118,768

Required:

1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.)

2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 79,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.)

3. Calculate the change in profit if the selling price were reduced by $10.50 each and annual sales were to increase by 7,400 units.

4. Determine the change in profit if the company were to increase advertising by $112,000 and if this were to increase sales by 7,400 units.