Question
Parkins Company produces and sells a single product. The company's income statement for the most recent month is given below: Sales (38,000 units at $41
Parkins Company produces and sells a single product. The company's income statement for the most recent month is given below: |
Sales (38,000 units at $41 per unit) | $ | 1,558,000 | ||||||
Less manufacturing costs: | ||||||||
Direct materials | $ | 304,000 | ||||||
Direct labor (variable) | 380,000 | |||||||
Variable factory overhead | 76,000 | |||||||
Fixed factory overhead | 190,000 | 950,000 | ||||||
Gross margin | 608,000 | |||||||
Less selling and other expenses: | ||||||||
Variable selling and other expenses | 152,000 | |||||||
Fixed selling and other expenses | 266,000 | 418,000 | ||||||
Net operating income | $ | 190,000 | ||||||
There are no beginning or ending inventories. |
Required: | |
a. | Compute the company's monthly break-even point in units of product. (Round your answer to the nearest whole number.) |
Break-even point in units |
b. | What would the company's monthly net operating income be if sales increased by 27% and there is no change in total fixed expenses? |
Net operating income | $ |
c. | What dollar sales must the company achieve in order to earn a net operating income of $210,000 per month? (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.) |
Sales | $ |
d. | The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 37 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) |
New break-even point in units |
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