Question

can anyone help me to solve this?

CT5.2 The condensed income statement for Peri and Paul ple for 2020 is as follows. Peri and Paul ple Income Statement For the Year Ended December 31, 2020 Sales (240,000 units) £1.200,000 Cost of goods sold 800,000 Gross profit 400,000 Operating expenses Selling £280,000 Administrative 150,000 430,000 Net loss £ (30,000) A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable. Instructions (Round to nearest unit, pence, and percentage, where necessary. Use the CVP income statement format in computing profits.) a. Compute the break-even point in total sales and in units for 2020. b. Perihas proposed a plan to get the company "out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending £0.25 more per unit on better raw materials. The selling price per unit could be increased to only £5.25 because of com- petitive pressures. Peri estimates that sales volume will increase by 25%. What effect would Peri's plan have on the profits and the break-even point in sales of the company? (Round the contribution margin ratio to two decimal places.) c. Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Peri's: (1) increase variable selling expenses to £0.59 per unit, (2) lower the selling price per unit by £0.25, and (3) increase fixed selling expenses by £40,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. What effect would Paul's plan have on the profits and the break-even point in sales of the company d. Which plan should be accepted? Explain your answer. Weygandt I Limun

Answer 1

$1,200,000 ( 800,000) 400,000 Given Statement Sales (240,000 units) Cost of goods Soid Gross profit operating Eupenses Seling 1280,000 Administratiu 150,000 430,000 $ 60,000) Netloss a) Breakeven point Fired cost 1 in Sales contribution margin Given cost of goods has 75% Variable cost Selling costs has 42% Variable.com Almi Gup. have 40% Variable cost Cost of goods Sold = £800,000 79% of coas : f 800000 x75% . Variable cots = 600,000 ! Fred coas = 200,000. Seline Grupures = $ 280,000 4.27. Valable 6.5 =$117,600 514 fruct se = $162,400

Administrabie Ay -= 150,000 404. Variable Ae 160,000 Got. Find AC = £90,ood Total Fired cost find lots of 200,000 Forel St é 162,400 . 90,000 £452 400 Ble sales = £ 4.52400 r Groupwf? 33.337. ( sale.com ble . Find AE = 1,357,200 BL sales variable cost po = Sales Costa lo 1. d.gad 1. Ble in unit = $nud cost udent Variable cast po .. (5-3);" $452,400 EI - 6 Lunib = 226,200 with plan out of red to as more peruit on Rawmatinas Selling price = $5.25 peut -

- Sales would increast by 25/. Mo. of units = 246.000 +61. - 600,000 linis Selly price = £ 5.25 Rawmaterial Cost = + 0.25 Vasiall coll) = Das 225p. Partulah Particular i friset in a a) Net Sales ( 300,000x55-25-1 1,575.000 bi Colas Vasiebe (30opocx9.25) 7 750; Fond (200,000) Tersee Goors proft c) Operating Eupenies. 430,000 Selling Net proft - 270,000 Ble points 447,52,400 44-494 = 1,017,901. c) Variable emp - Selby porce - Julear Fle - fo.squat 0.25 £40,000 lowes

Sales increases - 607. Total Sales 240,000+boy. s 384,000. a) bi patillas Hout int Net Sales . $ 2,408,000. (384,000 x 4.75 ) Variable logs 800€:00) Find lobe 1,405,000 B Gross proft Selig Gapen (608) 4414,320) Vavakle (195) x 3840040 (202400) 1. Find cost- 162400 1. i 490,800 . . Met proft c) 40000 Bl. Bla Salue Sales = $452400+40000 { catat. 772,25) d Hast plari which is given by Marketing encutie drould be consided