Reference no: EM13518305

Parkins Company produces and sells a single product. The company's income statement for the most recent month is given below:

Sales (6,000 units at $40 per unit)	$240,000
Less manufacturing costs:
Direct materials	$48,000
Direct labor (variable)	60,000
Variable factory overhead	12,000
Fixed factory overhead	30,000	150,000
Gross margin		90,000
Less selling and other expenses:
Variable selling and other expenses	24,000
Fixed selling and other expenses	42,000	66,000
Net operating income		$ 24,000

There are no beginning or ending inventories.

Required:

a. Compute the company's monthly break-even point in units of product.

b. What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?

c. What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month?

d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units.