Question

Bloomer Company has reported an operating loss of $40,000 with $30,000 of sales. The total variable...

Bloomer Company has reported an operating loss of $40,000 with $30,000 of sales. The total variable costs were $40,000. A proposal has been made recommending the purchase of a new machine. Fixed costs are expected to increase by $10,000 per year. The variable costs are predicted to fall, and for a sales level of $30,000 the costs are expected to be $17,500 lower than what they were last year. If costs behave as predicted, assuming the proposal is accepted, what will the break-even sales point in dollars be?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Sales = $30,000

Operating loss = $40,000

Total variable costs = 40,000

Total fixed costs = ?

(Total variable costs + Total fixed costs) - Sales = Operating loss

(40,000 + Total fixed costs) - 30,000 = 40,000

Total fixed costs = $30,000

After purchasing new machine, Total fixed costs will increase by $10,000 and Total variable costs will decrease by $17,500.

New Total fixed costs = 30,000 + 10,000

= $40,000

New Total variable costs = 40,000 - 17,500

= $22,500

Sales = $30,000

Contribution margin = Sales - New Total variable costs

= 30,000 - 22,500

= $7,500

Contribution margin ratio = Contribution margin/Sales

= 7,500/30,000

= 25%

Break even point (in dollar) = New Total fixed costs/Contribution margin ratio

= 40,000/25%

= $160,000

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
At a volume of 30,000 units, Tonto reported sales revenue of $1,200,000 variable costs of $280,000...
At a volume of 30,000 units, Tonto reported sales revenue of $1,200,000 variable costs of $280,000 and fixed costs of $320,000. The company's break even point is?
A company has two products: A and B. Product A has sales of $100,000, variable cost...
A company has two products: A and B. Product A has sales of $100,000, variable cost of $50,000, direct fixed costs of $40,000, and allocated common fixed costs of $20,000. Product B has sales of $150,000, variable cost of $70,000, direct fixed costs of $30,000, and allocated common fixed costs of $40,000. If product A is dropped, what will be the profit of the company?. Single choice. $10,000 profit $0 (no profit or loss) $10,000 loss $20,000 profit
. Assume that the CDE Company has yearly Fixed costs of $30,000 and its Variable costs...
. Assume that the CDE Company has yearly Fixed costs of $30,000 and its Variable costs are $30,000, which are 60% of its Sales. Calculate: [Use ONLY formula for your calculations. Do NOT use algebra] Question: Its profit or loss when its total sales are $110,000.      b. The sales level (dollars) required to break-even.      c. The sales needed to make a profit of $35,000. 2. ABC Company manufactures and distributes Product A. An extract from the 20X5 statement...
Berg Dry Cleaners has determined the following about its costs: Total variable expenses are $40,000; total...
Berg Dry Cleaners has determined the following about its costs: Total variable expenses are $40,000; total fixed expenses are $30,000, and the sales revenue needed to break even is $40,000. Use the contribution margin income statement and the shortcut contribution margin approaches to determine Berg Dry Cleaners’ current (1) sales revenue and (2) operating income. (Hint: First find the contribution margin ratio; then prepare the contribution margin income statement.)
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Sales $2,976,000 Cost...
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Sales $2,976,000 Cost of goods sold $744,000 Selling, general and administration 558,000 $1,302,000 Income from operations $ 1,674,000 In addition, assume that BeerBev sold 31,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects pricing,...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 165,500 units...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 165,500 units at a price of $117 per unit during the current year. Its income statement is as follows: Sales $19,363,500 Cost of goods sold 6,864,000 Gross profit $12,499,500 Expenses: Selling expenses $3,432,000 Administrative expenses 2,067,000 Total expenses 5,499,000 Income from operations $7,000,500 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50%...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 118,500 units...
Break-Even Sales Under Present and Proposed Conditions Darby Company, operating at full capacity, sold 118,500 units at a price of $45 per unit during the current year. Its income statement is as follows: Sales $5,332,500 Cost of goods sold 1,890,000 Gross profit $3,442,500 Expenses: Selling expenses $945,000 Administrative expenses 570,000 Total expenses 1,515,000 Income from operations $1,927,500 The division of costs between variable and fixed is as follows: Variable Fixed Cost of goods sold 60% 40% Selling expenses 50% 50%...
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $5,632,000...
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year: Net sales $5,632,000 Cost of goods sold $1,408,000 Selling, general and administration 576,000 $1,984,000 Income from operations $ 3,648,000 In addition, assume that BeerBev sold 32,000 barrels of beer during the year. Assume that variable costs were 75% of the cost of goods sold and 50% of selling, general and administration expenses. Assume that the remaining costs are fixed. For the following year, assume that BeerBev expects...
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year (in millions): Sales...
Break-Even Sales BeerBev, Inc., reported the following operating information for a recent year (in millions): Sales $3,248 Cost of goods sold $812 Gross profit $2,436 Marketing, general, and admin. expenses 522 Income from operations $ 1,914 Assume that BeerBev sold 29 million barrels of beer during the year, that variable costs were 75% of the cost of goods sold and 50% of marketing, general and administration expenses, and that the remaining costs are fixed. For the following year, assume that...
AStuart Company reported the following data regarding the product it sells Sales price $ 45 Contribution...
AStuart Company reported the following data regarding the product it sells Sales price $ 45 Contribution margin ratio 20 % Fixed costs $ 360,000 Required Use the contribution margin ratio approach and consider each requirement separately. A.    What is the break-even point in dollars? In units? B.    To obtain a profit of $36,000, what must the sales be in dollars? In units? C.    If the sales price increases to $48 and variable costs do not change, what is the new...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT