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Q5.(10point) For the year ended dec 31/2019 Gregg Company reported the following operating results while operating at 80% capacity Company Sales (100,000 units) $7,000,000 $8,000,000
Q5.(10point) For the year ended dec 31/2019 Gregg Company reported the following operating results while operating at 80% capacity Company Sales (100,000 units) $7,000,000 $8,000,000 $9,000,000 Cost of goods sold(60% variable, 40% fixed) $4,500,000 $5,000,000 $5,500,000 Gross profit $2,500,000 $3,000,000 $3,500,000 Operating expenses(70% variable30% fixed) $1,500,000 $2,000,000 $2,500,000 Net income $1,000,000 $1,000,000 $1,000,000 Cost of goods sold was 60% variable and 40% fixed; operating expenses were 70% variable and 30% fixed. Wholesaler company offers Gregg company to purchase all units produced instead of selling it to retailers, if Gregg company accepts, it will use the full capacity and save 50% of variable operating and 50% of fixed operating. Instructions: if the Gregg makes the decision and sell to the wholesaler company 1. sales level in units will be 2. total variable cost will be I 3. the amount of fixed avoided 4. what is the minimum selling price per unit (maintain the same level of net income)
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