Sales Cost of goods sold $186,000,000 (102,000,000) $84,000,000 Gross profit Expenses: Selling expenses $16,000,000 Administrative expenses 5,200,000 Total expenses (21,200,000) Operating income $62,800,000 The division of costs between variable and fixed is as follows: Cost of goods sold Selling expenses Administrative expenses Variable Fixed 70% 30% 75% 25% 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs.
Sales Cost of goods sold $186,000,000 (102,000,000) $84,000,000 Gross profit Expenses: Selling expenses $16,000,000 Administrative expenses 5,200,000 Total expenses (21,200,000) Operating income $62,800,000 The division of costs between variable and fixed is as follows: Cost of goods sold Selling expenses Administrative expenses Variable Fixed 70% 30% 75% 25% 50% 50% Management is considering a plant expansion program for the following year that will permit an increase of $11,160,000 in yearly sales. The expansion will increase fixed costs by $3,000,000 but will not affect the relationship between sales and variable costs.
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter12: Differential Analysis And Product Pricing
Section: Chapter Questions
Problem 12.16E: Product cost concept of product pricing Based on the data presented in Exercise 12-15, assume that...
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Step 1: Introduction of cost-volume-profit (CVP) analysis.
VIEWStep 2: (1) Determination of Total Variable cost and Total Fixed cost.
VIEWStep 3: (3) Computation of Break even sales (units) for the current year.
VIEWStep 4: (4) Computation of Break even sales (units) for the proposed program.
VIEWStep 5: (5) Determination of required sales (units) to realize $62,800,000 of operating income.
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