Question
Lauren Tarson and Michele Progransky opened Top Drawer Optical seven years ago with the goal of producing fashionable and affordable eyewear. Tarson and Progransky have
Lauren Tarson and Michele Progransky opened Top Drawer Optical seven years ago with the goal of producing fashionable and affordable eyewear. Tarson and Progransky have been very pleased with their revenue growth. One particular design, available in plastic and metal, has become one of the company's best sellers. The following data relate to this design: Plastic Frames &Metal Frames Sales price are 3,000 &4,000 Direct materials 1,000& 900 Direct labor 675 &675 Variable overhead 325& 425 Budgeted unit sales 5,00,000 &15,00,000 Currently, the company produces exactly as many frames as it can sell. Therefore, it has no opportunity to substitute a more expensive frame for a less expensive one. Top Drawer Optical's annual fixed costs s are currently 61.25 million.
Required: (Each of the following questions relates to an independent situation)
A. Calculate the total number of frames that Top Drawer Optical needs to produce and sell to break even.
B. Calculate the total number of frames that Top Drawer Optical needs to produce and sell to break even if budgeted direct material costs for plastic frames decrease by 500 and annual fixed costs increase by 6,25,000 for depreciation of a new production machine.
C. Tarson and Progransky have been able to reduce the company's fixed costs by eliminating certain unnecessary expenditures and downsizing supervisory personnel. Now, the company's fixed costs are 5,61,00,000. Calculate the number of frames that Top Drawer Optical needs to produce and sell to break even if the company sales mix changes to 35 percent plastic frames and 65 percent metal frames
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