Management is considering an increase in the unit sales

Reference no: EM13577324

This year Bertrand Company sold 42,000 units of its only product for $17.40 per unit. Manufacturing and selling the product required $127,000 of fixed manufacturing costs and $187,000 of fixed selling and administrative costs. Its per unit variable costs follow.


Material	$	4.70
Direct labor (paid on the basis of completed units)		3.70
Variable overhead costs		0.47
Variable selling and administrative costs		0.27

Next year the company will use new material, which will reduce material costs by 70% and direct labor costs by 30% and will not affect product quality or marketability. Management is considering an increase in the unit sales price to reduce the number of units sold because the factory's output is nearing its annual output capacity of 47,000 units. Two plans are being considered. Under plan 1, the company will keep the price at the current level and sell the same volume as last year. This plan will increase income because of te reduced costs from using the new material. Under plan 2, the company will increase price by 30%. This plan will decrease unit sales volume by 15%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.

Required:
1.	Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2.

2.	Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2. The statements should report sales, total variable costs, contribution margin, total fixed costs, income before taxes, income taxes (30% rate), and net income.

Reference no: EM13577324

Questions Cloud

Analyse the variance into capacity and expenditure : fixed overhead 72 000 variable overhead 3 per direct labour hour budgeted direct labour hours 15 000the actual fixed

In terms of classifying frauds under the fraud tree system : in terms of classifying frauds under the fraud tree system how does a scheme in which an employee fraudulently orders

Let x denote the number of times a certain numerical : let x denote the number of times a certain numerical control machine will malfunction 1 2 or 3 times on any given day.

X company estimates that machines will be operated for : x company has the following estimated costs for the year direct materials64700direct labor25200factory

Management is considering an increase in the unit sales : this year bertrand company sold 42000 units of its only product for 17.40 per unit. manufacturing and selling the

An investment fund is considering two long term investments : an investment fund is considering two long term investments. which investment offers the best rate of return assuming

Dscriptive statistics correlation coefficient showing the : the motion picture industry is a competitive business. more than 50 studios produce a total of 300 to 400 new motion

Assume that the life of a roller bearing follows a weibull : assume that the life of a roller bearing follows a weibull distribution with parameters szlig 2 and d 10000 hours.a

Lr plans to prepare a financial analysis that will be used : your firm specializes in providing a wide variety of internal business solutions for different clients. after a weekend

User Account

All Pages