Question

The Central Valley Company is a manufacturing firm that produces and sells a single product. The company’s revenues and expenses for the last four months are given below. Central Valley Company Comparative Income Statement March April May June Sales in units 6,900 6,400 8,100 9,800 Sales revenue $ 793,500 $ 736,000 $ 931,500 $ 1,127,000 Less: Cost of goods sold 421,350 397,440 484,380 574,770 Gross margin $ 372,150 $ 338,560 $ 447,120 $ 552,230 Less: Operating Expenses Shipping expense $ 65,300 $ 52,200 $ 68,800 $ 61,500 Advertising expense 98,500 98,500 98,500 98,500 Salaries and commissions 166,500 133,500 171,000 164,000 Insurance expense 18,500 18,500 18,500 18,500 Amortization expense 51,500 51,500 51,500 51,500 Total operating expenses $ 400,300 $ 354,200 $ 408,300 $ 394,000 Net income $ (28,150 ) $ (15,640 ) $ 38,820 $ 158,230 Required:

1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behaviour. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.)

2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 89,500 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.)

3. Calculate the change in profit if the selling price were reduced by $14.0 each and annual sales were to increase by 8,800 units.

4. Determine the change in profit if the company were to increase advertising by $119,000 and if this were to increase sales by 8,800 units.

Need help in solving part 3 & 4.

Answer 1