2.(10 points) Perkins Company produces and sells a single product. The com pany\

Question

2.(10 points) Perkins Company produces and sells a single product. The com pany's income statement for the most recent month is given below: Sales (15,000 units at $29 per unit)... Less variable costs: $435,000 Direct labor (variable).75 Variable factory overhead. Variable selling and other expenses.... .. 75,000 45,000 30,000 210,000 Contribution margin . 225,000 Less fixed expenses: Fixed factory overhead Fixed selling and other expenses 100,000 85,000 Net operating income. ?85,000 $ 40,000 There are no beginning or ending inventories. Required a. Compute the company's break-even point in units and sales dollars. b. What would the company's monthly net operating income be if sales c. What total level of sales (in units) must the company achieve in order to d. The company has decided to automate a portion of its operations. The and total variable costs increased by 25% and total fixed factory overhead dropped by $18,000? earn a target profit of $115,000? change will reduce direct labor costs per unit by 50 percent, but it will double the costs for fixed factory overhead. Every other cost remains unchanged. Compute the new break-even point in units.

Explanation / Answer

Contribution margin per unit = 225000/15000 = $15

1.Break even point in units = 185000/15 = 12334 units

Break even point in sales = 12334 * 29 = $357686

2.Sales 543750

Less: Variable cossts 262500

Less: Fixed factory overhead 82000

Less: Fixed selling overhead 85000

Net Operating income 114250

3. Fixed overheads = $ 185000

Target profit = $ 115000

Hence, contribution required = $300000

Sales in units =300000/15 = 20,000 units

4. Revised contribution =225000+37500 = $262500

contribution per unit = 17.5

Revised fixed costs = $285000

Breakeven units = 285000/17.5 = 16286 units.

Looking forward to your valuable upvote.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.