In: Accounting
Requirement 1. Use the equation approach to compute the number of flags
CrandallCrandall must sell each year to break even. First, select the formula to compute the required sales in units to break even.
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Target profit |
Rearrange the formula you determined above and compute the required number of flags to break even.
The number of flags Crandall must sell each year to break even is |
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Requirement 2. Use the contribution margin ratio approach to compute the dollar sales CrandallCrandall needs to earn $33,000 in operating income for 2018.
(Round the contribution margin ratio to two decimal places.)
Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn $33,000
in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.)
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Required sales in dollars |
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Requirement 3. Prepare
CrandallCrandall's
contribution margin income statement for the year ended
DecemberDecember 31, 2018, for sales of 70,000 flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)
Crandall Company |
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Contribution Margin Income Statement |
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Year Ended December 31, 2018 |
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Operating Income (Loss) |
Requirement 4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60
per flag. Compute the new breakeven point in units and in dollars. Should CrandallCrandall undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.) (Use the equation approach.)
Begin by selecting the formula to compute the required sales in units to break even under the expansion plan.
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= |
Target profit |
Rearrange the formula you determined above and compute the required number of flags to break even under the expansion plan.
Under the expansion plan, the breakeven point in units would be |
flags. |
Under the expansion plan, the breakeven point in dollars would be $ |
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Should CrandallCrandall undertake the expansion? Give your reasoning. CrandallCrandall should only undertake the expansion if expected profits from the expansion
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are equal to
are greater than
are less than
the expected costs.