Question

Bradjoli Inc. produces a single product. The results of operations for a typical month are as...

Bradjoli Inc. produces a single product. The results of operations for a typical month are as follows:

Sales revenue $540,000 Variable expenses 360,000 Contribution margin 180,000 Fixed costs 100,000 Operating income $ 80,000

The company produced and sold 120,000 kgs of product during the month, and there were no beginning or ending inventories. Bradjoli pays income tax at a rate of 25%.

Required: a) At the typical sales volume, calculate: 3 i) the breakeven point is units sold and in sales dollars. 2 ii) the margin of safety as a percentage. 3 iii) the operating leverage. Using the operating leverage, determine the operating profit that Bradjoli would report if sales were to increase 40%. 4 b) Compute the target sales in units and sales dollars if Bradjoli wants to earn an after-tax profit of $162,000. 1 i) At this sales volume, what is the operating leverage? 1 ii) At this sales volume, determine the operating profit that Bradjoli would report if sales were to increase 40%. 4 c) Using the typical month’s operating results as the starting point, calculate the breakeven point if Bradjoli plans to invest in automation with a monthly fixed cost of $25,000 and expects this will reduce variable expenses by $0.50 per unit. Do you recommend the company undertake this investment? Why or why not?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Total Units Per Unit
Sales 540000 120000 4.50
Less : Variable Expenses 360000 120000 3.00
Contribution 180000 1.50

Q.3(i)

Breakeven Points in units = Fixed Cost / Contribution per unit

= 100000 / 1.50

= 66,667 units

Breakeven Points in sales volume = 66667 * 4.50 = $300,000

Q.2(ii)

Margin of safety = (Current sales level - Breakeven Point) / Current Sales Level * 100

= (540000 - 300000) / 540000 * 100

= 44.44%

Q.3(iii)

Operating Leverage = Fixed Cost / Total Cost

= 100000 / 360000+100000

= 0.22

Q4.b

Target profit after tax profit 162000
Add: Tax 54000
Profit before tax 216000
Add: Fixed Cost 100000
Total Required Contribution 316000
Contribution per unit 1.50
Target sales unit (316000/1.50) 210666.66
Target Sales Value (210667 * 4.50) $948,000
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
MENTO COMPANY distributes a single product. The company's sales and expenses for last month follow: The...
MENTO COMPANY distributes a single product. The company's sales and expenses for last month follow: The company sales 15,000 units last month. Sales ....................... (15,000 units) ....................$ $450,000    Variable expenses .............................................    180,000 Contribution margin ............................................. $ 270,000 Fixed expenses ................................................... 216,000 Net operating income ........................................... . $ 54,000 REQUIRED 1. What is the monthly BREAK EVEN POINT in units and dollar sales? 2. What is the Contribution Margin at the Break Even Point ? 3. How many units...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of May appears below: Crystal Corporation Income Statement For the month ended May 31 Sales ($17 per unit) $3,102,500 Variable expenses: Variable cost of goods sold 1,825,000 Variable selling expense 547,500 Total variable expenses 2,372,500 Contribution margin 730,000 Fixed expenses: Fixed manufacturing overhead 405,000 Fixed selling and administrative 182,500 Total fixed expenses 587,500 Net operating income $142,500 The company produced 135,000 units in May and...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of May appears below: Crystal Corporation Income Statement For the month ended May 31 Sales ($21 per unit) $2,415,000 Variable expenses: Variable cost of goods sold 1,380,000 Variable selling expense 345,000 Total variable expenses 1,725,000 Contribution margin 690,000 Fixed expenses: Fixed manufacturing overhead 450,000 Fixed selling and administrative 115,000 Total fixed expenses 565,000 Net operating income $125,000 The company produced 90,000 units in May and...
2. Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per...
2. Shelhorse Corporation produces and sells a single product. Data concerning that product appear below: Per Unit Percent of Sales Selling price $ 170 100 % Variable expenses 68 40 % Contribution margin $ 102 60 % Fixed expenses are $346,000 per month. The company is currently selling 4100 units per month. Required: Calculate the Following: Contribution Margin Ratio: % Break Even point in Sales Dollars (rounded to the whole dollar) $ Margin of Safety in Units (nearest whole units)...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of...
Crystal Corporation produces a single product. The company's variable costing income statement for the month of May appears below: Crystal Corporation Income Statement For the month ended May 31 Sales ($23 per unit) $3,680,000 Variable expenses: Variable cost of goods sold 2,400,000 Variable selling expense 480,000 Total variable expenses 2,880,000 Contribution margin 800,000 Fixed expenses: Fixed manufacturing overhead 480,000 Fixed selling and administrative 160,000 Total fixed expenses 640,000 Net operating income $160,000 The company produced 120,000 units in May and...
9. Wimpy Inc. produces and sells a single product. The selling price of the product is...
9. Wimpy Inc. produces and sells a single product. The selling price of the product is $190.00 per unit and its variable cost is $60.80 per unit. The fixed expense is $394,128 per month. The break-even in monthly dollar sales is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice $1,231,650 $837,522 $579,600 $394,128 10. Majid Corporation sells a product for $180 per unit. The product's current sales are 42,000 units and its break-even sales are 34,410...
Oman industries, Inc. reporated sales of $1, 000,000 for the month and incurred variable expenses totaling...
Oman industries, Inc. reporated sales of $1, 000,000 for the month and incurred variable expenses totaling $650,000 and fixed expenses totaling $100,000. 8,000 units were produced and sold during the month. How many units would the company have to sell to achieve a desired profit 0f $500,000? What is the compay's break even in total sales dollars? What is the company's margin fo safety in dollars? What is the company's degree of operating leverage?
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total...
Menlo Company distributes a single product. The company’s sales and expenses for last month follow: Total Per Unit Sales $ 316,000 $ 20 Variable expenses 221,200 14 Contribution margin 94,800 $ 6 Fixed expenses 78,000 Net operating income $ 16,800 Required: 1. What is the monthly break-even point in unit sales and in dollar sales?            Break Even Point in unit sales            Break Even Point in dollar sales 2. Without resorting to computations, what is the total contribution margin at...
Goodson Inc. produces and sells a single product. The company had provided its contribution format income...
Goodson Inc. produces and sells a single product. The company had provided its contribution format income statement for March. Sales (4,500 units) = $427,500. Variable costs = 265,500. Contribution margin = 162,000. Fixed costs = 135,300. Operating profit - $26,700. If the company sells 4,300 units, its operating profit should be closest to: A) $26,700. B) $19,500. C) $7,700. D) $25,513.
Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement...
Margin of Safety and Operating Leverage Medina Company produces a single product. The projected income statement for the coming year is as follows: Sales (60,000 units @ $23.00) $1,380,000 Total variable cost 372,600 Contribution margin $ 1,007,400 Total fixed cost 973,820 Operating income $ 33,580 Required: 1. Compute the break-even sales dollars. $ 2. Compute the margin of safety in sales dollars. $ 3. Compute the degree of operating leverage. 4. Compute the new operating income if sales are 20%...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT