Homework Answers
| As per HOMEWORKLIB RULES i can only solve the 1st 4 parts of the question, for the rest please post another question | |||
| Part 1 | |||
| Particulars | Variable Cost | Fixed Cost | |
| Cost of goods sold | $ 2,600,000 | $ 1,400,000 | |
| Selling expenses | $ 2,000,000 | $ 500,000 | |
| Administrative expenses | $ 200,000 | $ 300,000 | |
| Total | $ 4,800,000 | $ 2,200,000 | |
| The East Company | |||
| Contribution Income Statement | |||
| Amount | Per unit | % of Sales | |
| Sales | $ 8,000,000 | $ 80.00 | 100% |
| Variable Costs | $ 4,800,000 | $ 48.00 | 60% |
| Contribution Margin | $ 3,200,000 | $ 32.00 | 40% |
| Fixed Costs | $ 2,200,000 | ||
| Net Operating Income | $ 1,000,000 | ||
| Part 2 | |||
| Break-even point in units($2,200,000/$32) | 68750 | units | |
| Break-even Point in $($2,200,000/40%) | $ 5,500,000 | ||
| Part 3 | |||
| Degree of Operating Leverage($3,200,000 / $1,000,000) | 3.20 | ||
| Part 4 | |||
| The East Company | |||
| Contribution Income Statement | |||
| Amount | Per unit | % of Sales | |
| Sales | $ 9,150,000 | $ 80.00 | 100% |
| Variable Costs | $ 5,490,000 | $ 48.00 | 60% |
| Contribution Margin | $ 3,660,000 | $ 32.00 | 40% |
| Fixed Costs | $ 2,500,000 | ||
| Net Operating Income | $ 1,160,000 | ||
| Break-even point in units($2,500,000/$32) | 78125 | units | |
| Break-even Point in $($2,200,000/40%) | $ 6,250,000 | ||
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Howard Industries Inc., operating at full capacity, sold 64,000
units at a price of $45 per unit during 2014. Its income statement
for 2014 is as follows:
The division of costs between variable and fixed is as
follows:
Management is considering a plant expansion program that will
permit an increase of $900,000 in yearly sales. The expansion will
increase
fixed costs by $212,500, but will not affect the relationship
between sales and
variable costs.
Required:
1. Determine the total fixed costs...
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