Question
The Central Valley Company is a manufacturing firm that produces and sells a single product. The companys revenues and expenses for the last four months
The Central Valley Company is a manufacturing firm that produces and sells a single product. The companys revenues and expenses for the last four months are given below. |
Central Valley Company Comparative Income Statement | ||||||||||||
March | April | May | June | |||||||||
Sales in units | 5,600 | 5,100 | 6,150 | 7,200 | ||||||||
Sales revenue | $ | 728,000 | $ | 663,000 | $ | 799,500 | $ | 936,000 | ||||
Less: Cost of goods sold | 386,900 | 358,020 | 415,740 | 477,360 | ||||||||
Gross margin | $ | 341,100 | $ | 304,980 | $ | 383,760 | $ | 458,640 | ||||
Less: Operating Expenses | ||||||||||||
Shipping expense | $ | 62,700 | $ | 54,800 | $ | 66,200 | $ | 68,000 | ||||
Advertising expense | 79,000 | 79,000 | 79,000 | 79,000 | ||||||||
Salaries and commissions | 162,600 | 140,000 | 164,500 | 177,500 | ||||||||
Insurance expense | 12,000 | 12,000 | 12,000 | 12,000 | ||||||||
Amortization expense | 45,000 | 45,000 | 45,000 | 45,000 | ||||||||
Total operating expenses | $ | 361,300 | $ | 330,800 | $ | 366,700 | $ | 381,500 | ||||
Net income | $ | (20,200 | ) | $ | (25,820 | ) | $ | 17,060 | $ | 77,140 | ||
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. Cost of goods sold =________ +________per unit shipping =________ +________per unit salaries&commission=________ +________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 break-even sales _________units annual profit(72000 units) ____________ |
3. | Calculate the change in profit if the selling price were reduced by $7.0 each and annual sales were to increase by 6,200 units. (decrease in loss/decrease in profit/increase in loss/increase 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 loss/incremental profit) $________ |
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