Calculate the breakeven point for the company

Assignment Help Accounting Basics
Reference no: EM13125485

The May 2011 income statement for Barbex Company is given below:
Sales (10,000 units) $ 100,000
Less variable costs 70,000
Contribution margin 30,000
Less fixed costs 24,000
Net income $ 6,000
The Barbex Company has ample unused capacity and is studying various ways of improving profits.

Required:

Each of the situations below is independent of the other. Provide the information requested.

1. New equipment has come onto market that would allow Barbex Company to automate a portion of its operations. Variable costs could be reduced by $3 per unit. However, fixed costs would increase by $30,000 each month. Firstly, prepare two contribution-type income statements, one showing present operations and one showing how operations would appear if the new equipment is purchased. Secondly, as a manager, what factors would be paramount in your mind in deciding whether to purchase the new equipment? Explain.

2. Refer to the original data. Barbex Company is thinking about changing its marketing method.

Under the new method sales would increase by 15 percent each month, and net income would increase by one third. Fixed cost could be slashed to only $15,000 per month. Calculate the breakeven point for the company before and after the change in marketing method.

3. Refer to the original data. Due to a sudden and unprecedented surge in demand, the company's sales increased by 25 percent during June 2011. During that month, net income increased by $3,000, or by 50 percent. By how much should net income have increased? Would you congratulate management for an outstanding performance, or would you chastise management for not doing its job well during the period? Explain.

Reference no: EM13125485

Questions Cloud

Calculate the ph of this buffer solution after the addition : Calculate the pH of this buffer solution after the addition of 0.010 moles of solid sodium hydroxide to the buffer
Is the expenditure deductible or nondeductible : Is the $18,000 expenditure deductible or nondeductible? Including proper citations to relevant authority.
Linear algebra and differential equations-real vector space : Determine if the given set constitutes a real vector space. The operations of "multiplication by a number" and "addition" are understood to be the usual operations associated with the elements of the set:
Calculate the ph of solution acidic acid : Determine pH of the solution....ICE table..Henderson HasselBach equations, Using a ICE table (initial change equilibrium) a)Calculate the pH of solution that is 0.175M in acidic acid(HC2H3O2) ans 0.110Min potassium Acetate(KC2H302)
Calculate the breakeven point for the company : Under the new method sales would increase by 15 percent each month, and net income would increase by one third. Fixed cost could be slashed to only $15,000 per month. Calculate the breakeven point for the company before and after the change in mar..
Obtain the sample mean that is at least fifty pounds : If the trash ag manufacturer hopes to obtain a sample mean that is at least 50 pounds which sample size n=5 or n=40 would be best.
Concentration of the nitric acid : During this time, titrate 5 mL samples taken from the volumetric flask with 0.1 molar NaOH using methyl red as an indicator to check the initial concentration of the nitric acid.
Maximum price pay for the bond : If you require a 7 percent nominal yield to maturity on this investment, what is the maximum price you should be willing to pay for the bond?
Information about linear algebra-wronskian : Compute the Wronskian of the given set of functions, then determine whether the function is linearly dependent or linearly independent: x^2 - x, x^2 + x, x^2, all x

Reviews

Write a Review

Accounting Basics Questions & Answers

  How much control does fed have over this longer real rate

Hubbard argues that the Fed can control the Fed funds rate, but the interest rate that is important for the economy is a longer-term real rate of interest.   How much control does the Fed have over this longer real rate?

  Coures:- fundamental accounting principles

Coures:- Fundamental Accounting Principles: - Explain the goals and uses of special journals.

  Accounting problems

Accounting problems,  Draw a detailed timeline incorporating the dividends, calculate    the exact Payback Period  b)   the discounted Payback Period. the IRR,  the NPV, the Profitability Index.

  Write a report on internal controls

Write a report on Internal Controls

  Prepare the bank reconciliation for company

Prepare the bank reconciliation for company.

  Cost-benefit analysis

Create a cost-benefit analysis to evaluate the project

  Theory of interest

Theory of Interest: NPV, IRR, Nominal and Real, Amortization, Sinking Fund, TWRR, DWRR

  Liquidity and profitability

Distinguish between liquidity and profitability.

  What is the expected risk premium on the portfolio

Your Corp, Inc. has a corporate tax rate of 35%. Please calculate their after tax cost of debt expressed as a percentage. Your Corp, Inc. has several outstanding bond issues all of which require semiannual interest payments.

  Simple interest and compound interest

Simple Interest, Compound interest, discount rate, force of interest, AV, PV

  Capm and venture capital

CAPM and Venture Capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd