The following data relate to a year\'s budgeted activity for Palisades Company,

ID: 2382056 • Letter: T

Question

The following data relate to a year's budgeted activity for Palisades Company, a single product company:

Per Unit

Selling price

$16.00

Variable manufacturing costs

6.00

Variable selling costs

4.00

Fixed manufacturing costs (based on 120,000 units)

1.50

Fixed selling costs (based on 120,000 units)

.50

Total fixed costs remain unchanged within the relevant range in which the company is currently operating.

What is the projected annual break-even sales in units?

What dollar amount of sales would Jorgenson need to achieve operating income of $50,000?

If fixed costs increased $15,000, how many more units must be sold to break even?

Per Unit

Selling price

$16.00

Variable manufacturing costs

6.00

Variable selling costs

4.00

Fixed manufacturing costs (based on 120,000 units)

1.50

Fixed selling costs (based on 120,000 units)

.50

a) breakeven sales is ( 1.5 + 0.5 ) * 120000 / ( 16 - 6 - 4 ) = 40,000 units

b) if operating income is 50,000

sales is ( 2 * 120000 + 50000 ) / ( 16 - 6 - 4 ) = 290000 / 6 units and the dollar amount is 290000 * 16 / 6 = 773,333.33

c) More units is 15000 / ( 16 - 6 - 4 ) = 15000 / 6 = 2500 more units

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