Question

Marshall Company had sales of $10,000 (100 units at $100 per). Manufacturing costs consisted of direct labor $1,500, direct materials $1,000, variable factory overhead $1,100, and fixed factory overhead $500. Selling expenses totaled $1,500 ($500 variable and $1,000 fixed), and administrative expenses totaled $1,600 ($410 variable and $1,190 fixed). Operating income was $2,800. Round all final answers to nearest dollar or whole number.

Requirements:

1. What is the break-even point in sales dollars and in units if the fixed factory overhead increased by $1,700?
2. What is the break-even point in sales dollars and in units if costs remain as originally projected?
3. What would be the operating income if sales units increased by 10%?

Question 5: 5 points a.1. a.2. Breakeven Sales Dollars Breakeven Units b.1. b.2. Breakeven Sales Dollars Breakeven Units C. Operating Income

Answer 1

		Total	Per Unit
Sales		10000	100
Less : Varaible Cost
direct labor	1500
direct materials	1000
variable factory overhead	1100
variable Selling expenses	500
variable administrative expenses	410	4510	45.1
Contribution Margin		5490	54.9
Less : Fixed Cost
Fixed factory overhead	500
Fixed Selling expenses	1000
Fixed administrative expenses	1190	2690
Operating income		2800
a) Breakeven sales Dollars	= Fixed Cost/Contribution Margin ratio
Contribution Margin ratio	= Contribution Margin per unit/selling price per unit
	=54.9/100
	54.90%
Breakeven sales Dollars	=(2690+1700)/0.549
	7996.36
Breakeven sales units	= Fixed Cost/Contribution Margin per unit
	=(2690+1700)/54.9
	80	Units
b) Breakeven sales Dollars	= Fixed Cost/Contribution Margin ratio
Contribution Margin ratio	= Contribution Margin per unit/selling price per unit
	=54.9/100
	54.90%
Breakeven sales Dollars	=2690/0.549
	4899.82
Breakeven sales units	= Fixed Cost/Contribution Margin per unit
	=2690/54.9
	49	Units

c)
		Total	Per Unit
Sales		11000	100
Less : Varaible Cost		4961	45.1
Contribution Margin		6039	54.9
Less : Fixed Cost		2690
Operating income		3349