A firm operated at 80% of capacity for the past year, during which fixed costs were $196,000, variable costs were 61% of sales, and sales were $912,000. Operating profit was
a.$556,320
b.$159,680
c.$127,744
d.$355,680
Spice Inc.'s unit selling price is $50, the unit variable costs are $32, fixed costs are $101,000, and current sales are 9,900 units. How much will operating income change if sales increase by 5,500 units?
a.$277,200 increase
b.$178,200 decrease
c.$99,000 increase
d.$178,200 increase
If fixed costs are $282,000, the unit selling price is $70, and the unit variable costs are $51, what are the old and new breakeven sales (units) if the unit selling price increases by $6?
a.5,529 units and 10,780 units
b.4,029 units and 14,842 units
c.14,842 units and 4,029 units
d.14,842 units and 11,280 units
1) Option b $159,680
Working:
Variable cost= (912,000*61%) =$556,320
Contribution margin=SalesVariable cost
=912,000556,320=$355,680
Less: Fixed costs= (196,000)
Operating profit=$159,680
2) Option C $99,000 increase
Working:
Current 
Proposed 

Unit sales 
9900 
(9900+5500)=15400 
Sales 
(9900*50)=495,000 
(15400*50)=$770,000 
Variable expenses 
(9900*32)=316,800 
(15400*32)=$492,800 
Contribution margin 
178,200 
277,200 
Fixed Costs 
101,000 
101,000 
Operating income 
77,200 
176,200 
Hence increase in Operating income= (176,20077,200)=$99,000
3) Option d 14,842 units and 11,280 units
Working:
Breakeven sales (units) =fixed costs / selling price variable costs
$282,000/$70$51=14,842 units
New breakeven sales (units) = fixed costs / selling price variable costs
$282,000/$76$51=11,280 units
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