Question

Required information

[The following information applies to the questions displayed below.]

Corrigan Enterprises is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gismo. Data relevant to the systems follow.

Model no. 6754:
	Variable costs, $19.00 per unit
	Annual fixed costs, $985,800

Model no. 4399:
	Variable costs, $10.80 per unit
	Annual fixed costs, $1,114,200

Corrigan’s selling price is $63 per unit for the universal gismo, which is subject to a 10 percent sales commission. (In the following requirements, ignore income taxes.)

2-a. Calculate the net income of the two systems if sales and production are expected to average 41,000 units per year.

	Net Income
Model No. 6754
Model No. 4399

Answer 1

MODEL NO 6754 Amount in $ MODEL NO 4399 Amount in $

SALES (41000*$63) 2583000 SALES(41000*$63) 2583000

Less: Sales commission(10%) (258300) Less:Sales commission(10%) (258300)

Less: Variable cost (41000*$19) (779000) Less: Variable cost (41000*$10.8) (442800)

Contribution 1545700 Contribution 1881900

Less:Fixed cost (given) (985800) Less: Fixed cost (given) (1114200)

NET INCOME   559900 NET INCOME 767700

MODEL	NET INCOME
6754	$559900
4399	$767700