Question

In: Accounting

Gelbart Company manufactures gas grills. Fixed costs amount to $25,428,000 per year. Variable costs per gas...

Gelbart Company manufactures gas grills. Fixed costs amount to $25,428,000 per year. Variable costs per gas grill are $350, and the average price per gas grill is $1,000.

1. How many gas grills must Gelbart Company sell to break even?

___ gas grills

2. If Gelbart Company sells 42,235 gas grills in a year, what is the operating income?
$__

3. If Gelbart Company’s variable costs increase to $370 per grill while the price and fixed costs remain unchanged, what is the new break-even point? If required, round your answer to the nearest whole number.
___ gas grills

Solutions

Expert Solution

Answer:-1)- Break-even point in unit sales = Fixed cost/Contribution per unit

                                                       =$25428000/$650 per unit= 39120 gas grills

   2)-Operating income = (Contribution margin per unit*Units sold)-Fixed costs

=$650 per gas grills*42235 gas grills =$27452750                                                 

  

3)-Break-even point in unit sales = Fixed cost/Contribution per unit

                  =$25428000/($1000 per unit-$370 per unit)= 40362 gas grills

Where:-

Contribution margin per unit=Selling price per unit-Variable cost per unit

=$1000 per unit-$350 per unit

=$650 per unit

ekkarill92 answered 10 months ago
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