Requirement 1. Use the equation approach to compute the number of flags

Crandall must sell each year to break even. First, select the formula to compute the required sales in units to break even.

-

-

=

Target profit

Rearrange the formula you determined above and compute the required number of flags to break even.

The number of flags Crandall must sell each year to break even is

.

Requirement 2. Use the contribution margin ratio approach to compute the dollar sales CrandallCrandall needs to earn $33,000 in operating income for 2018.

(Round the contribution margin ratio to two decimalplaces.)

Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $33,000

in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to$11. Abbreviation used: CM = contribution margin.)

(

+

) /

=

Required sales in dollars

(

+

) /

%

=

Requirement 3. Prepare

Crandall's contribution margin income statement for the year ended

December 31, 2018, for sales of 70,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)

Crandall Company
Contribution Margin Income Statement
Year Ended December 31, 2018
Operating Income (Loss)

Requirement 4.

The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60

per flag. Compute the new breakeven point in units and in dollars. Should Crandall undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.) (Use the equation approach.)

Begin by selecting the formula to compute the required sales in units to break even under the expansion plan.

-

-

=

Target profit

Rearrange the formula you determined above and compute the required number of flags to break even under the expansion plan.

Under the expansion plan, the breakeven point in units would be

flags.

Under the expansion plan, the breakeven point in dollars would be $

.

Should Crandall undertake the expansion? Give your reasoning. Crandall should only undertake the expansion if expected profits from the expansion

?

are equal to

are greater than

are less than

the expected costs.