Pure Cane Sugar Ortho-Dental Co. Sales $6,000,000 $6,000,000 Total Expenses $3,5
ID: 2452178 • Letter: P
Question
Pure Cane Sugar Ortho-Dental Co.
Sales $6,000,000 $6,000,000
Total Expenses $3,500,000 $3,500,000
Fixed costs $1,550,000 $2,700,000
Variable costs $1,950,000 $800,000
A. Calculate net income for each company
B. Suppose sales decreased by 15%. Which company will report the highest net income? Why?
C. Suppose sales increased by 15%. Which company will report the highest net income? Why?
Explanation / Answer
Sales decreased by 15% pure cane sugar will report the highest net income of $ 1,892,500 because it fied cost is less.
Sales increase by 15% ortho dental will report higest incom becuase its fixed cost is more, thus producing additional units will not increase the fixed cost only the small part of variable cost will increase.
Pure cane sugar 15% decrease Ortho Dental Company 15% decrease Sales 6,000,000 5,100,000 6,000,000 5,100,000 Variable cost 1,950,000 1,657,500 800,000 680,000 Contribution margin 4,050,000 3,442,500 5,200,000 4,420,000 fixed expenses 1,550,000 1,550,000 2,700,000 2,700,000 Net income 2,500,000 1,892,500 2,500,000 1,720,000 Pure cane sugar 15% increase Ortho Dental Company 15% increase Sales 6,000,000 6,900,000 6,000,000 6,900,000 Variable cost 1,950,000 2,242,500 800,000 920,000 Contribution margin 4,050,000 4,657,500 5,200,000 5,980,000 fixed expenses 1,550,000 1,550,000 2,700,000 2,700,000 Net income 2,500,000 3,107,500 2,500,000 3,280,000Related Questions
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