Question 1:

The Westover Company manufactures and sells pens. Currently, 5,500,000 units are sold per year at $0.50 per unit. Fixed costs are $1,140,000 per year. Variable costs are $0.20 per unit. Read the Requirement 1. What is the current annual operating income? (a) Start by determining the formula to calculate operating income. 1)- Fixed costs = Operating income The current annual operating income is (b) What is the current breakeven point in revenues? Determine the formula to calculate the breakeven point in revenues. Breakeven units Seling price = Breakeven revenues The current breakeven point in revenues equal Compute the new operating income for requirements 2 through 4 : Requirement 2. A $0.10 per unit increase in variable costs results in a new operating of Requirement 3. A 20% increase in fixed costs and a 20% increase in untis sold resuls in a new operating of Requirement 4. A 30% decrease in fixed costs, 30% decrease in seling price, a 10% decrease in variable coat per unit, and a 45% Requirements Consider each case separately: 1. a. What is the current annual operating income? b. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: 2. A $0.10 per unit increase in variable costs 3. A 20% increase in foxed costs and a 20% increase in units sold 4. A 30% decrease in fixed costs, a 30% decrease in selling price, a 10% decrease in variable cost per unit, and a 45% increase in units soid Compute the new breakeven point in units for each of the following changes: 5. A20\% increase in fixed costs 6. A 20% increase in selling price and a $10,000 increase in foced costs