Question
In: Accounting
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 is
$150000150000.
Requirement 1. (b) What is the present breakeven point in revenues?
Determine the formula to calculate the breakeven point in revenues.
|
Breakeven units |
x |
Selling price |
= |
Breakeven revenues |
The present breakeven point in revenues equals
$22750002275000.
(Hold all decimals in interim calculations. Round your final answer to the nearest whole dollar.)
Requirement 2. Compute the new operating income or loss for cases a, b, and c. (Use parentheses or a minus sign to show an operating loss.)
a. A
$0.05
per unit increase in variable costs results in a new operating income or loss of
$(115,000)(115,000).
b. A
10%
increase in fixed costs and a
10%
increase in units sold results in a new operating income or loss of
$nothing.
please send me the whole answer
Solutions
Expert Solution
| Requirement 1(-a)- Westoveer company Manufactures | |||||||||
| ( | Units sold | x ( | Selling price | - | Variable costs | ) ) - | Fixed costs | = | Operating income |
| ( | 5300000 | x ( | $0.50 | - | $0.30 | ) ) - | 910000 | = | $150,000 |
| Requirement 1(b) | ||||
| Breakeven units | X | Selling Price | = | Breakeven revenues |
| 4550000 | X | $0.50 | = | $2,275,000 |
| * Breakeven Unit = Fixed Cost/ Contribution Margin per Unit | ||||
| =910000/(0.5-0.3)=4550000 Unit |
| Requirement -2 (a)), in Case of increase in Variable Cost | ||
| Sales Reveue (5300000*0.50) | $2,650,000.00 | |
|
Less: Variable Cost (5300000*(0.30+0.05)) |
$1,855,000.00 | |
| Contribution Margin | $795,000.00 | |
| Less; Fixed Cost | $910,000.00 | |
| Net Operating Income | -$115,000.00 |
| Requirement -2 (b), in Case of increase in Fixed Cost & Unit Sold | ||
| Sales Reveue (5300000**1.10*0.50) | $2,915,000.00 | |
|
Less: Variable Cost (5300000*1.10*0.30) |
$1,749,000.00 | |
| Contribution Margin | $1,166,000.00 | |
| Less; Fixed Cost (910000*1.10) | $1,001,000.00 | |
| Net Operating Income | $165,000.00 |
ekkarill92 answered 1 year agoRelated 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
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