q4-2

The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below. Central Valley Company Comparative Income Statement March April 5,600 5, 100 $ 728,000 $ 663,000 386,900 358, 020 $ 341,100 $ 304,980 May 6,15 $ 799,500 415,740 $ 383,760 June 7,200 $ 936,000 477,360 $ 458,640 Sales in units Sales revenue Less: Cost of goods sold Gross margin ess: Operating expenses Shipping expense Advertising expense Salaries and commissions Insurance expense Amortization expense Total operating expenses Net income $ 62,700 79, eee 162,600 12, eee 45,00 $361,300 $ (20,200) $ 54,800 79, eee 140,000 12,000 45,000 $ 330,800 $ (25,820) $ 66,200 79,000 164,500 12, eee 45,000 $366,700 $ 17,060 $ 68,000 79,000 177,500 12,000 45, eee $ 381,500 $ 77,140 Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.) Cost of goods sold Shipping Salaries & commission $ $ 56.83 per unit 6.29 per unit + + $ 17.86 per unit 2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 72,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) units Break-even sales Annual profit (72,000 units) 3. Calculate the change in profit if the selling price were reduced by $7.00 each and annual sales were to increase by 6,200 units. Decrease in profit 4. Determine the change in profit if the company were to increase advertising by $106,000 and if this were to increase sales by 6,200 units. Incremental profit