Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The condensed budgeted income statement for the Debra and Gary partnership for 2022 is as follows: DEBRA AND GARY LLP Income Statement Year Ending December

The condensed budgeted income statement for the Debra and Gary partnership for 2022 is as follows:

DEBRA AND GARY LLP Income Statement Year Ending December 31, 2022
Sales (307,200 units) $1,536,000
Cost of goods sold 1,024,000
Gross profit 512,000
Operating expenses
Selling $358,400
Administrative 192,000 550,400
Operating loss $(38,400)

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

--/6

Debra 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 $0.20 more per unit on better raw materials. The selling price per unit could be increased to only $5.20 because of competitive pressures. Debra 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 Debra's plan have on the partnership's operating income and its break-even point in dollars?

This plan would select an option have/have no effect on the break-even point in units, but select an effect increases/decreases break-even point in sales dollars because of the select an option higher/lower selling price.
It select an option decreases/increases the operating income before tax from a select an option profit/loss of $enter a dollar amount to an select an item operating income after taxo/perating income before tax of $enter a dollar amount .

Question Part Score

--/6

Gary 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 Debra's: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.20, and (3) increase fixed selling expenses by $51,200. Gary quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Calculate Gary's 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

--/6

Determine which plan should be accepted.

select a plan Debra's plan/Gary's plan/Both the plans/None of the plans should be accepted.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Horngrens Cost Accounting A Managerial Emphasis

Authors: Srikant M. Datar, Madhav V. Rajan

17th Edition

0135628474, 9780135628478

More Books

Students also viewed these Accounting questions

Question

How does mindfulness practice assist in rational decision-making?

Answered: 1 week ago