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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
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 5,400 4,900 $718.200 $651.700 381,600 351,918 Sales in units Sales revenue Less: Cost of goods sold May 5,850 $778.050 404,586 June 6,800 $904.400 461,244 $336,600 $299,782 $373,464 $443, 156 Gross margin Less: Operating Expenses Shipping expense Advertising expense Salaries and commissions Insurance expense Amortization expense $ 62,300 76,000 162,000 11.000 44,000 $ 55,200 76.000 141,000 11.000 44.000 $ 65,800 76.000 163,500 11,000 44.000 $ 69,000 76.000 178,500 11,000 44,000 Total operating expenses $355,300 $327,200 $360,300 $378,500 Net income $(18,700) $ (27,418) $ 13,164 $ 64,656 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 + per unit per unit per unit + 2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 70,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) units Break-even sales Annual profit (70,000 units) 3. Calculate the change in profit if the selling price were reduced by $6.0 each and annual sales were to increase by 5,800 units. 4. Determine the change in profit if the company were to increase advertising by $104,000 and if this were to increase sales by 5,800 units
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