shhow details plz: CVP computations. Garrett Manufacturing sold 410,000 units of
ID: 2378093 • Letter: S
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shhow details plz:
CVP computations. Garrett Manufacturing sold 410,000 units of its product for $68 per unit in 2011 Variable cost per unit is S60 and total fixed costs are $1,640,000. Calculate (a) contribution margin and lb) operating income. Garrett's current manufacturing process is labor intensive Kate Schoenen, Garrett's production manager, has proposed investing in stste-of-the-art manufacturing equipment, which will increase the annual fixed costs to $5,330,000. The variable costs are expected to decrease to $54 per unit. Garrett expects to maintain the same sales volume and selling price next year. How would acceptance of schoenen's proposal affect your answer to (a) and (b) in requirement 1? Should Garrett accept schoenen's proposal? Explain.Explanation / Answer
1) Contribution Margin Per unit = 68- 60 = $8
a)Contribution Margin = 8*410000 = $3,280,000
b) Operating Income = $3280000-1640000= $1640000
2) Contribution Margin Per unit = 68- 54 = $14
a)Contribution Margin = 14*410000 = $5,740,000
b) Operating Income = $5740000-5330000= $410,000
3) No Garret should not accept schoemen's Propsal because the operating income will decline from $1640000 to $410000 i.e $1230000
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