Perkins company produces and sells a single product. The Company\'s income state
ID: 2503679 • Letter: P
Question
Perkins company produces and sells a single product. The Company's income statement for the most recent month is given below:
Sales (15,000 units at $32 per unit)
$480,000
Less variable costs:
Direct materials (variable)
$67,500
Direct labor (variable)
75,000
Variable factory overhead
50,000
Variable selling and other expenses
40,000
232,500
Contribution margin
247,500
Less fixed expenses:
Fixed factory overhead
75,000
Fixed selling and other expenses
45,000
120,000
Net operating income
$127,500
There are no beginning or ending inventories.
Required:
Sales (15,000 units at $32 per unit)
$480,000
Less variable costs:
Direct materials (variable)
$67,500
Direct labor (variable)
75,000
Variable factory overhead
50,000
Variable selling and other expenses
40,000
232,500
Contribution margin
247,500
Less fixed expenses:
Fixed factory overhead
75,000
Fixed selling and other expenses
45,000
120,000
Net operating income
$127,500
Explanation / Answer
CONTRIBUTION MARGIN PER UNIT = 247500/15000
= 16.5 PER UNIT
CONTRIBUTIOMN MARGINN RATIO = CONTRIBUTIO / SALES* 100
= 247500/480000 * 100
= 51.56%
TOTAL FIXED COST = Fixed factory overhead + Fixed selling and other expenses
= 75000 + 45000
=$120000
1] BREAK EVEN POINT IN UNITS = TOTAL FIXED COST/ CONTRIBUTION MARGIN PER UNIT
= 120000/16.5
=7272.72 UNITS
BREANK EVEN POINT IN DOLLAR SALES = TOTAL FIXED COST/ CONTRIBUTION MARGIN RATIO
= 120000/0.5156
= $232739
2]NEW SALES = 480000*(1.25) = 600000
NEW VARIABLE COST = 232500*(1.25) = 290000
NEW FIXED COST= (75000 + 45000)-30000 = $90000
THEREFORE ,
NEW NET OPERATING INCOME = 600000
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