Rosario Company, which is located in Buenos Aires, Argentina, manufactures a com
ID: 2587850 • Letter: R
Question
Rosario Company, which is located in Buenos Aires, Argentina, manufactures a component used in farnm machinery. The firm's fixed costs are 3,300,000 p per year. The variable cost of each component is 1,300 p, and the components are sold for 3,600 p each. The company sold 5,800 components during the prior year. (p denotes the peso, Argentina's national currency. Several countries use the peso as their monetary unit On the day this exercise was written, Argentina's peso was worth.192 U.S. dollars. In the following requirements, ignore income taxes.) Required: 1. Compute the break-even point in units. (Round your final answer to nearest whole number.) Break-even point components 2. What will the new break-even point be if fixed costs increase by 10 percent? (Round your final answer to nearest whole number.) New break-even point components 3. What was the company's net income for the prior year? Net income 4. The sales manager believes that a reduction in the sales price to 3,100 p will result in orders for 800 more components each year. What will the break-even point be if the price is changed? (Round your final answer to nearest whole number.) New break-even point componentsExplanation / Answer
1.break even point in units:
=>fixed costs / contribution per unit
here,
fixed costs = $3,300,000
contribution per unit = 3600 - 1300 =>2300p
contribution per unit = 3,300,000 / 2300p
=>1,435 components....(rounded to nearest whole number).
2.new break even point
new fixed costs = 3,300,000 + 10%
=>$3,630,000.
new break even point = 3,630,000 / 2300p
=>1,578 components..(rounded nearest whole number).
3.net income for prior year:
4.new break even point
=> fixed costs / new contribution per unit
new contribution per unit
=>3100p - 1300p =>1800p
new break even point = 3,300,000 / 1800p
=>1,833 components.
Sales (3600p * 5800 components) 20,880,000p less: variable costs (1,300p*5,800) (7,540,000) contribution margin 13,340,000p less:fixed costs 3,300,000p net income 10,040,000pRelated Questions
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