question 5 Sunshine Company manufactures and sells pens. Currently, 6,000,000 units are sold per year at...

question 5 Sunshine Company manufactures and sells pens. Currently, 6,000,000 units are sold per year at $0.70 per unit. Fixed costs are $980,000 per year. Variable costs are $0.30 per unit.

Consider each case separately:

Required:

1. a. What is the current annual operating income?

b. What is the current breakeven point in revenues?

Compute the new operating income for each of the following changes:

2. A $0.03 per unit increase in variable costs

3. A 12% increase in fixed costs and a 10% increase in units sold

4. A 18% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable

cost per unit, and a 40% increase in units sold

Compute the new breakeven point in units for each of the following changes:

4. A 10% increase in fixed costs

5. A 10% increase in selling price and a $20,000 increase in fixed costs

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

The Westover Company manufactures and sells pens. Present sales output is 5,300,000 units per year at...

The Westover Company manufactures and sells pens. Present sales output is 5,300,000 units per year at a selling price of $0.50 per unit. Fixed costs are $910,000 per year. Variable costs are $0.30 per unit.Required (Consider each case separately.) 1. a. What is the present operating income for a year? b. What is the present breakeven point in revenue? 2. Compute the new operating income for each of the following independent changes: a. A $0.05 per unit increase in variable...

The Westover Company manufactures and sells pens. Present sales output is 5,300,000 units per year at...

The Westover Company manufactures and sells pens. Present sales output is 5,300,000 units per year at a selling price of $0.50 per unit. Fixed costs are $910,000 per year. Variable costs are $0.30 per unit.Required LOADING... Requirement 1. (a) What is the present operating income for a year? Start by determining the formula to calculate operating income. [ Units sold x ( Selling price - Variable costs ) ] - Fixed costs = Operating income The current annual operating income...

Sunshine Ltd manufactures motorised skateboards. Currently, the company produces 5,000 units. Sunshine Ltd makes the motor...

Sunshine Ltd manufactures motorised skateboards. Currently, the company produces 5,000 units. Sunshine Ltd makes the motor for their motorised scooter range in batches of 500 units (i.e. 10 batches for 5,000 units). The equipment used to make the motors is rented from Scania Engineering. Inspection, set‐up and materials‐handling costs vary with the number of batches. The costs for making 5000 motors are as follows: Cost/unit Cost for 5,000 units Direct materials $ 4.00 $ 20,000 Direct labour $ 2.00 $ ...

1. SWS Company currently purchases 6,000,000 units per year of a particular part from WDS Industries....

1. SWS Company currently purchases 6,000,000 units per year of a particular part from WDS Industries. The current contract sets the price at $1.00 per unit and allows one reject for each 10,000 rings purchased. SWS inspects all incoming units at a cost of $250,000 per year. The inspection station correctly identifies 100% of the acceptable units and 75% of the units that do not meet SWS’s quality criteria. Unacceptable units that pass through the inspection station lead to a...

Currently, the sales of a company is $12,800,000 per year: price per unit $12.8; units sold...

Currently, the sales of a company is $12,800,000 per year: price per unit $12.8; units sold 1,000,000 per year; direct cost per unit $9.60; A/R 25% of $ sales (ignore A/P); inventory 25% of direct cost; cash operating expense $890,000 per year; annual depreciation $600,000; tax rate 34%; capital expenditure is zero. Now you are estimating the free cash flow for the next year when the unit sales price changes to $15.36, thus changing $ sales; however, the number of...

1. Griffith Company manufactures suitcases. The company is currently producing and selling 40,000 units per year...

1. Griffith Company manufactures suitcases. The company is currently producing and selling 40,000 units per year and it has the capacity to produce 42,000 units per year. The following information relates to current production: Sale price per unit $195 Costs per unit: Variable Manufacturing $80 Fixed Manufacturing $15 Variable Selling and Administrative $45 Fixed Selling and Administrative $10 Griffith is considering an order from a new customer for 2,000 suitcases at a total price of price of $250,000. Assume that...

Currently, the NBA Company sells 600 units of its product, NETS, per year with a $500...

Currently, the NBA Company sells 600 units of its product, NETS, per year with a $500 selling price. Variable Expenses for the financial period were $180,000. Fixed Expenses for the financial period totaled $100,000. The management of the company believes that they can double the selling price and sell 50% more units if they spend $50,000 more in advertising. Construct a Contribution Margin Statement for both the current and proposed scenario. Determine if management’s initiative should be implemented. Be...

Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts.

Question Gilberto Company currently manufactures 65,000 units per year of one of its crucial parts. Variable costs are $1.95 per unit, fixed costs related to making this part are $75,000 per year, and allocated fixed costs are $62,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $3.25 per unit guaranteed for a three-year period. Should the company continue to...

1. Gelb Company currently manufactures 58,500 units per year of a key component for its manufacturing...

1. Gelb Company currently manufactures 58,500 units per year of a key component for its manufacturing process. Variable costs are $6.25 per unit, fixed costs related to making this component are $75,000 per year, and allocated fixed costs are $83,500 per year. The allocated fixed costs are unavoidable whether the company makes or buys this component. The company is considering buying this component from a supplier for $3.70 per unit. Calculate the total incremental cost of making 58,500 units and...

Broom Brothers produces and sells one product. The firm currently sells 10,000 units per year for...

Broom Brothers produces and sells one product. The firm currently sells 10,000 units per year for $80 per unit. Total variable costs are $60 per unit and fixed costs are $150,000. a) What is breakeven sales in units? b) What is the margin of safety in units? What’s the margin of safety in dollars? c) What is the degree of operating leverage? d) If sales increase to 15,000 units per year, profits will increase by ____%. e) How many units...

Subjects