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Kincaid Company sells flags with team logos. Kincaid has fixed costs of $576,000 per year plus variable costs of $6.40 per flag. Each flag sells
Kincaid Company sells flags with team logos. Kincaid has fixed costs of $576,000 per year plus variable costs of $6.40 per flag. Each flag sells for $16.00. Read the requirements. Requirement 1. Use the equation approach to compute the number of flags Kincaid must sell each year to break even. First, select the formula to compute the required sales in units to break even. Fixed costs - = Target profit Rearrange the formula you determined above and compute the require Contribution margin per unit The number of flags Kincaid must sell each year to break even is Fixed costs Net sales revenue Requirement 2. Use the contribution margin ratio approach to comput Net sales revenue per unit Begin by showing the formula and then entering the amounts to calcul Variable costs example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.) )/ = Required sales in dollars L % = L to earn $38,400 in operating income for 2018. (Round the contribution margin ratio to two decimal places.) arn $38,400 in operating income. (Round the required sales in dollars up to the nearest whole dollar. For Requirement 3. Prepare Kincaid's contribution margin income statement for the year ended December 31, 2018, for sales of 52,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.) Kincaid Company Contribution Margin Income Statement Year Ended December 31, 2018 Operating Income (Loss) Requirement 4. The company is considering an expansion that will increase fixed costs by 40% and variable costs by $1.60 per flag. Compute the new breakeven point in units and in dollars. Should Kincaid undertake the expansion? Give your reasoning- (Round your final answers up to the next whole number.) (Use the equation approach.) Begin by selecting the formula to compute the required sales in units to break even under the expansion plan. - - - Target profit Rearrange the formula you determined above and compute the required number of flags to break even under the expansion plan. Under the expansion plan, the breakeven point in units would be flags. Under the expansion plan, the breakeven point in dollars would be $ . Should Kincaid undertake the expansion? Give your reasoning. Kincaid should only undertake the expansion if expected profits from the expansion the expected costs
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