Question

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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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

Answer 1

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