The condensed budgeted income statement for the Barbara and Michael partnership for 2022 is as follows:

BARBARA AND MICHAEL LLP Income Statement Year Ending December 31, 2022
Sales (206,400 units)				$1,032,000
Cost of goods sold				688,000
Gross profit				344,000
Operating expenses
Selling		$240,800
Administrative		129,000		369,800
Operating loss				$(25,800)

A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable. (Use the CVP income statement format in calculating operating income.)

Calculate the break-even point in total sales dollars and in units for 2022. (Round contribution margin per unit to 2 decimal places, e.g. 1.25, contribution margin ratio to 1 decimal place, e.g. 15.2% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

Question Part Score

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Barbara has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.30 more per unit on better raw materials. The selling price per unit could be increased to only $5.30 because of competitive pressures. Barbara estimates that sales volume will increase by 25%. Calculate the break-even point in total sales dollars and in units under the proposed plan. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

What effect would Barbaras plan have on the partnerships operating income and its break-even point in dollars?

This plan would select an option havehave no effect on the break-even point in units, but select an effect increasesdecreases break-even point in sales dollars because of the select an option higherlower selling price.

It select an option decreasesincreases the operating income before tax from a select an option profitloss of $enter a dollar amount to an select an item operating income after taxoperating income before tax of $enter a dollar amount .

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Michael was a marketing major in university. He believes that the sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Barbaras: (1) increase variable selling expenses to $0.60 per unit, (2) lower the selling price per unit by $0.30, and (3) increase fixed selling expenses by $34,400. Michael quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Calculate Michaels break-even point in dollars and units. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$enter a dollar amount
Break-even point in units		enter a number of units

Question Part Score

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Determine which plan should be accepted.

select a plan Barbaras planMichael's planBoth the plansNone of the plans should be accepted.