Denny Manufacturing had a bad year in 2012. For the first time in its history, i
ID: 2466756 • Letter: D
Question
Denny Manufacturing had a bad year in 2012. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 75,000 units of product: Net sales $1,477,500; total costs and expenses $1,729,900; and net loss $252,400. Costs and expenses consisted of the following.
Total
Variable
Fixed
Management is considering the following independent alternatives for 2013.
(a) Compute the break-even point in dollars for 2012. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
$ ________
(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
Break-even point
Which course of action do you recommend?
B) Alternative 2
C) Alternative 3
Total
Variable
Fixed
Cost of goods sold $1,204,300 $782,100 $422,200 Selling expenses 411,800 70,500 341,300 Administrative expenses 113,800 49,900 63,900 $1,729,900 $902,500 $827,400Explanation / Answer
a)
b) Calculation of the break-even point in dollars under each of the alternative courses of action.
Which course of action do you recommend?
Alternative 3 should be selecte because it has higher it has least BEP with rising contribution margin ratio.
Break even point in 2012 Particulars $ Sales 1,477,500 Lesss:Variable Cost 902,500 Contribution a 575,000 No of Sales Units b 75,000 Contribution per unit c= (a/b) 7.7 Fixed Cost d 827,400 Break even point (in units)e= d/c 107,922 Sales price per unit (f) = $1477,500/75000 unit 20 Break even point (in sales $) e*f 2,126,058Related Questions
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