Question
In: Accounting
Hall Industries operates at full capacity. It sold 64,000 units at a price of $45 per...
Hall Industries operates at full capacity. It sold 64,000 units at a price of $45 per unit during the current year. Its profit & loss statement is as follows:
Sales $ 2,880,000
Cost of goods sold 1,400,000
Gross profit $ 1,480,000
Expenses:
Selling expenses $400,000
Administrative expenses 387,500 787,500
Income from operations $ 692,500
The division of costs between variable and fixed is as follows:
Variable Fixed
Cost of goods sold 75% 25%
Selling expenses 60% 40%
Administrative expenses 80% 20%
Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs..
Required:
- Determine the total fixed costs and the total variable costs for the current year.
- Determine the unit variable cost and the unit contribution margin for the current year.
- Compute the break-even sales (units) for the current year.
- Compute the break-even sales (units) under the proposed program for the following year.
- Determine the amount of sales (units) that would be necessary under the proposed program to achieve $692,500 of income from operations that was earned in the current year.
- Determine the maximum income from operations possible with the expanded plant.
- If the proposal is accepted and sales remain at the current level, what will the income or loss from operations be for the following year?
- Would you recommend accepting the program based on the data given?
Solutions
ekkarill92 answered 3 years agoRelated Solutions
Darby Company, operating at full capacity, sold 159,800 units at a price of $51 per unit...
Darby Company, operating at full capacity, sold 159,800 units at
a price of $51 per unit during the current year. Its income
statement is as follows:
Sales
$8,149,800
Cost of goods sold
2,890,000
Gross profit
$5,259,800
Expenses:
Selling expenses
$1,445,000
Administrative expenses
867,000
Total expenses
2,312,000
Income from operations
$2,947,800
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%
Administrative expenses
30%
70%
Management is considering...
Break-Even Sales Under Present and Proposed Conditions Howard Industries Inc., operating at full capacity, sold 64,000...
Break-Even Sales Under Present and Proposed Conditions
Howard Industries Inc., operating at full capacity, sold 64,000
units at a price of $45 per unit during the current year. Its
income statement is as follows:
Sales
$2,880,000
Cost of goods sold
1,400,000
Gross profit
$1,480,000
Expenses:
Selling expenses
$400,000
Administrative
expenses
387,500
Total expenses
787,500
Income from operations
$ 692,500
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
75%
25%
Selling expenses...
Break-Even Sales Under Present and Proposed Conditions Howard Industries Inc., operating at full capacity, sold 64,000...
Break-Even Sales Under Present and Proposed Conditions
Howard Industries Inc., operating at full capacity, sold 64,000
units at a price of $45 per unit during the current year. Its
income statement is as follows:
Sales
$2,880,000
Cost of goods sold
(1,400,000)
Gross profit
$1,480,000
Expenses:
Selling expenses
$400,000
Administrative expenses
387,500
Total expenses
(787,500)
Operating income
$692,500
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
75%
25%
Selling expenses
60%
40%...
Margin of Safety Kearney Company, operating at full capacity, sold 400,000 units at a price of...
Margin of Safety
Kearney Company, operating at full capacity, sold 400,000 units
at a price of $246.60 per unit during 2015. Its income statement
for 2015 is as follows:
Sales
$ 98,640,000
Cost of goods sold
(44,500,000)
Gross profit
$ 54,140,000
Expenses:
Selling expenses
$8,000,000
Administrative expenses
3,000,000
Total
expenses
(11,000,000)
Income from operations
$ 43,140,000
The division of costs between fixed and variable is as
follows:
Fixed
Variable
Cost of good sold
28%
72%
Selling expenses
25%
75%
Administrative...
Darby Company, operating at full capacity, sold 163,500 units at a price of $66 per unit during the current year. Its income statement is as follows
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 163,500 units at a price of $66 per unit during the current year. Its income statement is as follows
Sales
$10,791,000
Cost of goods sold
3,828,000
Gross profit
$6,963,000
Expenses:
Selling expenses
$1,914,000
Administrative expenses
1,144,000
Total expenses
3,058,000
Income from operations
$3,905,000
The division of costs between variable...
Company A is operating at full capacity, sold 45,600 units during the current year. Its income...
Company A is operating at full capacity, sold 45,600 units
during the current year. Its income statement is as follows:
Sales
$5,654,400
Cost of goods sold
3,618,816
Gross profit
$2,035,584
Expenses:
Selling expenses
$984,000
Administrative expenses
430,000
Total expenses
1,414,000
Income from operations
$ 621,584
The division of costs between variable and fixed is as follows:
(round to nearest dollar)
Variable
Fixed
Cost of goods sold
70%
30%
Selling expenses
20%
80%
Administrative expenses
10%
90%
Management is planning to...
When the price of a toy was $45, a store sold 200 units in one week....
When the price of a toy was $45, a store sold 200 units in one
week. Then the store reduced the price of the toy to $20.00 As a
result, sale of the toy increased to 25 units in one week.
(a). Calculate price elasticity of demand (5 points). You must
show the calculation here. Do not try to copy and paste.
(b). Interpret your results (5 points)
Part 4 – CVP Analysis Seth’s Airway Cleaning Services, operating at full capacity, sold 10,000 units...
Part 4 – CVP Analysis
Seth’s Airway Cleaning Services, operating at full capacity, sold
10,000 units at a price of $175 per unit during the year. Their
income statement is as follows:
Sales ............................................... $1,750,000
Cost of goods sold ............................ 1,450,000 Gross
Profit ........................................ $300,000
Expenses: Selling expenses ..................... $53,000
Administrative expenses .......... $47,000 Total Expenses
........................................................ $100,000
Income from operations ...........................................
$200,000
The division of costs between fixed and variable is as
follows:
Fixed Variable
Cost of goods sold...
Break-Even Sales Under Present and Proposed Conditions Portmann Company, operating at full capacity, sold 1,000,000 units...
Break-Even Sales Under Present and Proposed Conditions
Portmann Company, operating at full capacity, sold 1,000,000
units at a price of $188 per unit during the current year. Its
income statement is as follows:
Sales $188,000,000
Cost of goods sold
(98,000,000)
Gross profit
$90,000,000
Expenses:
Selling expenses $14,000,000
Administrative expenses 17,800,000
Total expenses
(31,800,000)
Operating income
$58,200,000
The division of costs between variable and...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 163,500 units...
Break-Even Sales Under Present and Proposed Conditions
Darby Company, operating at full capacity, sold 163,500 units at
a price of $66 per unit during the current year. Its income
statement is as follows
Sales
$10,791,000
Cost of goods sold
3,828,000
Gross profit
$6,963,000
Expenses:
Selling expenses
$1,914,000
Administrative
expenses
1,144,000
Total expenses
3,058,000
Income from operations
$3,905,000
The division of costs between variable and fixed is as
follows:
Variable
Fixed
Cost of goods sold
60%
40%
Selling expenses
50%
50%...
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