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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 Sales in units Sales revenue Less: Cost of goods sold Gross margin Less: Operating expenses 5,400 April 4,900 $ 718,200 381,600 $ 651,700 May 5,850 $ 778,050 351,918 404,586 June 6,800 $ 904,400 461,244 $ 336,600 $ 299,782 55,200 $ 65,800 $ 69,000 $ 373,464 $ 443,156 Shipping expense Advertising expense Salaries and commissions Insurance expense Amortization expense Total operating expenses Net income $ 62,300 76,000 $ 162,000 11,000 44,000 76,000 141,000 11,000 44,000 76,000 76,000 163,500 178,500 11,000 11,000 44,000 44,000 $ 378,500 $ 355,300 $ 327,200 $ 360,300 $ (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.) HINT:Use the hi-low method from chapter 6. Cost of goods sold Shipping per unit + 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 70,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) Break-even sales Annual profit (70,000 units) units 3. Calculate the change in profit if the selling price were reduced by $6.00 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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