Chapter 21 Accounting
| Ballywide Company, operating at full capacity, sold 92,240 units at a price of $140 per unit during 2013. Its income |
| statement for 2013 is as follows: |
|
|
|
| |
|
|
|
| Sales |
|
12,913,600 |
|
| Cost of goods sold |
|
5,000,000 |
|
| Gross profit |
|
7,913,600 |
|
| Expenses: |
|
|
|
| Selling expenses |
2,800,000 |
|
|
| Administrative expenses |
1,720,000 |
|
|
| Total expenses |
|
4,520,000 |
|
| Income from operations |
|
3,393,600 |
|
| |
|
|
|
| The division of costs between fixed and variable is as follows: |
|
| |
|
|
|
| |
Fixed |
Variable |
|
| Cost of Sales |
45% |
55% |
|
| Selling expense |
55% |
45% |
|
| Administrative expense |
65% |
35% |
|
| |
|
a. Determine for 2013 the total fixed costs and the total variable costs. |
b. Determine for 2013 (1) the unit variable cost and (2) the unit contribution margin. |
c. Compute the break‐even sales in units for 2013. |
d. Compute the break‐even sales in units under the proposed program. |
f. Determine the maximum income from operations possible with the expanded plant. |
h. Based on the data given, would you recommend accepting the proposal? |
e. Determine the amount of sales in units that would be necessary under the proposed program to realize the |
$3,393,600 of income from operations that was earned in 2013. |
g. If the proposal is accepted and sales remain at the 2013 level, what will the income or loss from operations be for |
2014? |
|
|
|
|
|
|
|
|
|
|
|
|
