Zachary Company currently produces and sells 7,800 units annually of a product that has a variable cost of $13 per unit and annual fixed costs of $238,600. The company currently eams a $89,000 annual profit. Assume that Zachary has the opportunity to invest in new labor-saving production equipment that will enable the company to reduce variable costs to $11 per unit. The investment would cause fixed costs to increase by $9.500 because of additional depreciation cost. Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Zachary invests in the new production equipment. Complete this question by entering your answers in the tabs below Required A Required B Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). Sales price per unit Required B > Required a. Use the equation method to determine the sales price per unit under existing conditions (current equipment is used). b. Prepare a contribution margin income statement, assuming that Zachary invests in the new production equipment. Complete this question by entering your answers in the tabs below. Required A Required B Prepare a contribution margin income statement, assuming that Zachary invests in the new production equipment. ZACHARY COMPANY Contribution margin Income statement (Required A Exercise 3-14A (Algo) Conducting sensitivity analysis using the equation method LO 3-5 Adams Company produces a product that has a variable cost of $25 per unit and a sales price of $55 per unit. The company's annual fixed costs total $730,000. It had net income of $290,000 in the previous year. In an effort to increase the company's market share, management is considering lowering the selling price to $49 per unit Required a. If Adams desires to maintain net income of $290.000. how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $49, Adams also desires to increase its net income by $72,000. Determine the number of units the company must sell to earn the desired income. Complete this question by entering your answers in the tabs below. Required A Required B If Adams desires to maintain net income of $290,000, how many additional units must it sell to justify the price decline? Additional units required units Required a. If Adams desires to maintain net income of $290,000, how many additional units must it sell to justify the price decline? b. Assume that in addition to lowering its selling price to $49, Adams also desires to increase its net income by $72.000. Determine the number of units the company must sell to earn the desired income. Complete this question by entering your answers in the tabs below. Required A Required B Assume that in addition to lowering its selling price to $49, Adams also desires to increase its net income by $72,000. Determine the number of units the company must sell to earn the desired Income Number of units sold ( Required A Problem 3-20A (Algo) Determining the break-even point and preparing a break-even graph LO 3-1, 3-3 Reid Company is considering the production of a new product. The expected variable cost is $24 per unit. Annual fixed costs are expected to be $892,500. The anticipated sales price is $75 each. Required Determine the break-even point in units and dollars using each of the following: a. Use the equation method. b. Use the contribution margin per unit approach. c. Use the contribution margin ratio approach. (Do not round intermediate calculations. Round "Contribution margin ratio" to 1 decimal place. (i.e., 0.234 should be entered as 23.4)) a. Break even point in units Break-even point in dollars Contribution margin per unit Break-even point in units Break-even point in dollars Contribution margin ratio Break even point in units Break-even point in dollars Thornton Company is considering adding a new product. The cost accountant has provided the following data: Expected variable cost of manufacturing Expected annual fixed manufacturing costs anufactur costs $ 48 per unit $ 65,000 $6 The administrative vice president has provided the following estimates: Expected sales commission Expected annual fixed administrative costs $ 6 per unit $ 55,000 The manager has decided that any new product must at least break even in the first year. Required Use the equation method and consider each requirement separately. a. If the sales price is set at $74, how many units must Thornton sell to break even? b. Thornton estimates that sales will probably be 12,000 units. What sales price per unit will allow the company to break even? c. Thornton has decided to advertise the product heavily and has set the sales price at $79. If sales are 9.000 units, how much can the company spend on advertising and still break even? a Number of units b Sales price C Advertising cost per unit
