THIS IS A DIFFERENT QUESTION THEN THE FIRST ONE. IT WAS RESPONDED TO THE SAME WA
ID: 2388830 • Letter: T
Question
THIS IS A DIFFERENT QUESTION THEN THE FIRST ONE. IT WAS RESPONDED TO THE SAME WAY AS THE FIRST. PLEASE READ CAREFULLYArtistic Woodcrafting Inc. cabinet shop. The offer two grades of cabinet Grade I and Grade II
Last year $850,000 sales volume, First 6 months this year $600,000 and sales expected to be $1.6 billion for the entire year.
The average unit selling prices, unit, variable costs, and direct cost are as follows:
Grade I - Unit Price 3,400 Unit variable cost 2,686 Direct fixed cost 95,000
Grade II - Unit Price 1,600 Unit variable cost 1,323 Direct fixed cost 95,000
Common fixed cost (fixed cost not traceable to either cabinet) are $35,000
Currently for every 3 Grade I sold, 7 Grade II are sold.
1. If computer controlled machines are purchase to make parts variable cost will decrease by 9%
but common fixed will increase by $44,000. Commute the effect on operating income also calculate
new break even point. Machines purchases at beginning of 6th month. Fixed cost incurred uniformaly.
2. Use original data. AWI is adding a retail outlet. This increase fixed cost by $70,000 per year.This change sales mix to 1:1. Retail outlet sales expected to increase by 30%..assumed opened at beginning of 6th month. Calculate the effect on expected profits for the current year, calculate new break-even point. Fixed cost are incurred uniformly.
Explanation / Answer
Let number of Grade 1 and Grade II sold this year be 3x and 7x sales from Grade 1 = 3x*3,400 = $10200x sales from Grade II = 7x*1,600 = $11200x $10200x + $11200x = $1.6 billion x = 74766.355 number of Grade 1 sold = 224299.0654 number of Grade II sold = 523364.49 1. Breakeven Revenue = variable cost + fixed cost 3x*3,400 +7x*1,600 = 3x*2,686 +7x*1,323 + 95,000 + 95,000 2142x + 1939x = 190000 x = 46.557 number of Grade 1 sold = 46.557*3 = 140 number of Grade II sold =46.557*7= 326
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