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 6,200 5,700 $762,600 $701,100 402,800 378,594 Sales in units Sales revenue Less: Cost of goods sold May 7,050 $867,150 450,918 June 8,400 $1,033,200 526,932 $359,800 $322,506 $416,232 $ 506,268 $ Gross margin Less: Operating Expenses Shipping expense Advertising expense Salaries and commissions Insurance expense Amortization expense $ 63,900 88,000 164,400 15,000 48,000 $ 53,600 88,000 137,000 15,000 48,000 $ 67,400 88,000 167,500 15,000 48,000 65,000 8 8,000 171,500 15,000 48,000 Total operating expenses $379,300 $341,600 $385,900 $ 387,500 Net income $ (19,500) $ (19,094) $ 30,332 $ 118,768 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 79,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) units Break-even sales Annual profit (79,000 units) 3. Calculate the change in profit if the selling price were reduced by $10.5 each and annual sales were to increase by 7,400 units. 4. Determine the change in profit if the company were to increase advertising by $112,000 and if this were to increase sales by 7,400 units. 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 6,200 5,700 $762,600 $701,100 402,800 378,594 Sales in units Sales revenue Less: Cost of goods sold May 7,050 $867,150 450,918 June 8,400 $1,033,200 526,932 $359,800 $322,506 $416,232 $ 506,268 $ Gross margin Less: Operating Expenses Shipping expense Advertising expense Salaries and commissions Insurance expense Amortization expense $ 63,900 88,000 164,400 15,000 48,000 $ 53,600 88,000 137,000 15,000 48,000 $ 67,400 88,000 167,500 15,000 48,000 65,000 8 8,000 171,500 15,000 48,000 Total operating expenses $379,300 $341,600 $385,900 $ 387,500 Net income $ (19,500) $ (19,094) $ 30,332 $ 118,768 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 79,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) units Break-even sales Annual profit (79,000 units) 3. Calculate the change in profit if the selling price were reduced by $10.5 each and annual sales were to increase by 7,400 units. 4. Determine the change in profit if the company were to increase advertising by $112,000 and if this were to increase sales by 7,400 units
