Question

5:45 My ASU a sing Variable expenses are $19 per unit and fixed expenses total $38,000 per month Sales volume for May totaled 4,530 units Required: a Calculate operating income for May b. Calculate the break-even point in terms of units sold and total revs(Round your intermediate calculations to the nearest whole dollar c. Management is considering installing automated equigment to reduce drect labor cost this were done, variable expenses wouild drop to $13 per unit, buit fwed expenses would increase to $62,600 per month. c-1. Calalate operating noome at a volne of4S30พts per mont with the new cost structure. e-2. Calalate the break-even point in units with the new cost structure. c-3. Why would you suggest that management seriously consider investing in the automated equipment and accept the new cost structure? -4. Why might management not accept your recommendation but decide instead to maintain the old cost structure? May totaled 4,530 units 2-16 PM Ip in cost of

Answer 1

a)	contribution				77010
	fixed expense				-38000
	operating income				39010	answer
b)	Break even voulme		(38000/17)		2235
	break even revenue		(38000*36)/17=		80471
c-1)	contribtion (36-13)*4530=				104190
	fixed expense				-62600
	operating income				41590	answer
c-2)	Break even voulme		(62600/23)		2722
c-3)	increase
c-4)	new /automated