### Determine the operating profit company

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##### Reference no: EM13535025

Company Y was on track to sell 550,000 units in the year, but late in the year, a major customer canceled a large order for 50,000 units. The business reduced its production output to 500,000 units, as you see in table. Determine the operating profit Company Y would have earned if it had manufactured and sold 550,000 units in the year.

 Company Y Company Z Operating Profit Report for Year Per Unit Totals Per Unit Totals Sales volume, in Units 500,000 2,000,000 Sales Revenue \$85.00 \$42,500,000 \$25.00 \$50,000,000 Cost of Goods Sold Expense (see below) -56 -28,000,000 -18.45 -36,900,000 Gross Margin \$29.00 \$14,500,000 \$6.55 \$13,100,000 Variable Operating Expenses -12.5 -6,250,000 -2.5 -5,000,000 Contribution Margin \$16.50 \$8,250,000 \$4.05 \$8,100,000 Fixed Operating Expenses -5,000,000 -7,500,000 Operating Profit \$3,250,000 \$600,000 Manufacturing Activity Summary for Year Per Unit Totals Per Unit Totals Annual Production Capacity, in Units 800,000 2,500,000 Actual Output, in Units 500,000 2,500,000 Raw Materials \$15.00 \$7,500,000 \$7.50 \$18,750,000 Direct Labor 20 10,000,000 2.75 6,875,000 Variable Manufacturing Overhead Costs 5 2,500,000 5 12,500,000 Total Variable Manufacturing Costs \$40.00 \$20,000,000 \$15.25 \$38,125,000 Fixed Manufacturing Overhead Costs 16 8,000,000 3.2 8,000,000 Product Cost and Total Manufacturing Costs \$56.00 \$28,000,000 \$18.45 \$46,125,0

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