Kirkland

Garage Doors manufactures a premium garage door. Currently, the price and cost data associated with the premium garage door are as follows:

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Requirement 1.What is the company's current breakeven in units and in dollars?

Begin by identifying the formula to compute the breakeven sales in units using the contribution margin approach.

(

Fixed expenses

+

Operating income

) /

Contribution margin per unit

=

Breakeven sales in units

The breakeven point in units is

350

units.

The breakeven point in dollars is $

560,000

.

Requirement 2. If the company expects to sell

560

premium garage doors in the upcoming year, and it does not develop the software control system, what is its expected operating income from premium garage doors?

Begin by identifying the formula to compute the operating income.

Sales revenue

-

Variable expenses

-

Fixed expenses

=

Operating income

If the company expects to sell 560 garage doors, and it does not develop the software control system, its expected
operating income is $	134,400	.

Requirement 3. If the software control system were to be developed and implemented, what would be the company's new breakeven point in units and in dollars?

The breakeven point in units is

370

units.

The breakeven point in dollars is $

592,000

.

Requirement 4. If the company expects to sell

560

premium garage doors in the upcoming year, and it develops the software control system, what is its expected operating income from premium garage doors?

If the company expects to sell 560 garage doors, and it develops the software control system, its expected
operating income is $		.

, emium garage doors? omg i Data Table ara $ 1,600 700 keven rol ... Average selling price per premium garage door.... Average variable manufacturing cost per door... Average variable selling cost per door Total annual fixed costs. 260 .. $ $ 224,000 Print Done ntro ects age arage doors, and it develops the software control system, its expected e data.) Mun garage door. Currently, the price and cost data associated with the premium garage doc (Click the icon to view more information.) MY ) 9 9 , om premium garage doors? la to co More Info 1560 9 3,400 ren e cont Kirkland Garage Doors has undertaken several sustainability projects over the past few years. Management is currently evaluating whether to develop a comprehensive software control system for its manufacturing operations that would significantly reduce scrap and waste generated during the manufacturing process. If the company were to implement this software control system in its manufacturing operations, the use of the software control system would result in an increase of $72,000 in its annual fixed costs while the average variable manufacturing cost per door would drop by $160. is $ rol Print Done y expe m gara 560 garage doors, and it develops the software control system, its expected , emium garage doors? omg i Data Table ara $ 1,600 700 keven rol ... Average selling price per premium garage door.... Average variable manufacturing cost per door... Average variable selling cost per door Total annual fixed costs. 260 .. $ $ 224,000 Print Done ntro ects age arage doors, and it develops the software control system, its expected e data.) Mun garage door. Currently, the price and cost data associated with the premium garage doc (Click the icon to view more information.) MY ) 9 9 , om premium garage doors? la to co More Info 1560 9 3,400 ren e cont Kirkland Garage Doors has undertaken several sustainability projects over the past few years. Management is currently evaluating whether to develop a comprehensive software control system for its manufacturing operations that would significantly reduce scrap and waste generated during the manufacturing process. If the company were to implement this software control system in its manufacturing operations, the use of the software control system would result in an increase of $72,000 in its annual fixed costs while the average variable manufacturing cost per door would drop by $160. is $ rol Print Done y expe m gara 560 garage doors, and it develops the software control system, its expected