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Perkins company produces and sells a single product. The Company's income statement for the most recent month is given below: Sales (15,000 units at $32
Perkins company produces and sells a single product. The Company's income statement for the most recent month is given below:
Sales (15,000 units at $32 per unit)
$480,000
Less variable costs:
Direct materials (variable)
$67,500
Direct labor (variable)
75,000
Variable factory overhead
50,000
Variable selling and other expenses
40,000
232,500
Contribution margin
247,500
Less fixed expenses:
Fixed factory overhead
75,000
Fixed selling and other expenses
45,000
120,000
Net operating income
$127,500
There are no beginning or ending inventories.
Required:
- Compute the company's break-even point in units and sales dollars.
- What would the company's monthly net operating income be if sales and total variable costs increased by 25% and total fixed factory overhead dopped by $30,000?
- What total level of sales (in Units)must the company achieve in order to earn a target profit of $45,000?
- The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 50 percent, but it will double the costs for fixed factory overhead. Every other cost remains unchanged. Compute the new break-even point in units.
Perkins company produces and sells a single product. The Company's income statement for the most recent month is given below:
Sales (15,000 units at $32 per unit) |
| $480,000 |
Less variable costs: | ||
Direct materials (variable) | $67,500 |
|
Direct labor (variable) | 75,000 |
|
Variable factory overhead | 50,000 |
|
Variable selling and other expenses | 40,000 | 232,500 |
Contribution margin |
| 247,500 |
Less fixed expenses: | ||
Fixed factory overhead | 75,000 |
|
Fixed selling and other expenses | 45,000 | 120,000 |
Net operating income |
| $127,500 |
There are no beginning or ending inventories.
Required:
- Compute the company's break-even point in units and sales dollars.
- What would the company's monthly net operating income be if sales and total variable costs increased by 25% and total fixed factory overhead dopped by $30,000?
- What total level of sales (in Units)must the company achieve in order to earn a target profit of $45,000?
- The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 50 percent, but it will double the costs for fixed factory overhead. Every other cost remains unchanged. Compute the new break-even point in units.
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