Question

Q.2. Park Company produces and sells a single product. The company's income statement for the most recent month is given below: Sales (6,000 units at $40 per unit) ............. $240,000 Less manufacturing costs: Direct materials............. ..... $48,000 Direct labor (variable) ..... .60,000 Variable factory overhead 12,000 Fixed factory overhead 30,000 150,000 Gross margin ..... 90,000 Less selling and other expenses: Variable selling and other expenses ....... 24,000 Fixed selling and other expenses ........... 42,000 66,000 Net operating income...... $ 24,000 There are no beginning or ending inventories. Required: a. Compute the company's monthly break-even point in units of product. b. What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses? c. What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month? d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units. (2+3+3+2=10)

Answer 1

مارمول Dete CA Statement of profit Amourd in ($) 240,000 Sales neu. Variable Cost: Direct Material Direct labour Vaviable factory overhead «Variable selling & other exponse Contribution Margin hou. fixed factaly overhead fixed selling & other expene et operating greeme 3 Monthly Break even point (Units) Total fixed cost 48000 Go,000 1Q000 24000 96000 301000 4 2006 4000 Contribution p.y. 30,000 +42000 14500 Umits * Hele Contribution рч 96000 6000 inits 1612 peicnit.

classnute Para of Sales increased by 25% then Net Opekoting income will be as follocos: - Statement of heart Sales (240,000 + 25%) Total Vairable Cost C144000 + 25%] Contribution Morgan 300,000 180/000 19-0/000 Leu Total fixed Cost 72000 48000 met operating Income