NEED HELP WITH #7 Break-Even Sales Under Present and Proposed Conditions Colt In
ID: 2345043 • Letter: N
Question
NEED HELP WITH #7Break-Even Sales Under Present and Proposed Conditions
Colt Industries Inc., operating at full capacity, sold 30,000 units at a price of $56 per unit during 2012. Its income statement for 2012 is as follows:
Management is considering a plant expansion program that will permit an increase of $1,120,000 in yearly sales. The expansion will increase fixed costs by $400,000, but will not affect the relationship between sales and variable costs.
Determine for 2012 the total fixed costs and the total variable costs.
Fixed costs: $416000
Variable costs: $720000
2. Determine for 2012 (a) the unit variable cost and (b) the unit contribution margin.
Unit variable cost: $24
Unit contribution margin: $32
3. Compute the break-even sales (units) for 2012.
units...... 13000
4. Compute the break-even sales (units) under the proposed program.
units
25500
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $544,000 of income from operations that was earned in 2012.
units
42500
6. Determine the maximum income from operations possible with the expanded plant.
$ 784000
7. If the proposal is accepted and sales remain at the 2012 level, what will the income or loss from operations be for 2013?
$
Explanation / Answer
You dont have the whole question posted but you take the the income from operations in 2012, which is $544,000 and subtract the the expansion fixed cost, $400,000. The answer is an income of $144,000
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