Reference no: EM132697025
Question - The condensed income statement for the Blossom and Paul partnership for 2020 is as follows.
Blossom and Paul Company Income Statement For the Year Ended December 31, 2020
Sales (240,000 units) $1,200,000
Cost of goods sold 800,000
Gross profit 400,000
Operating expenses
Selling $280,000
Administrative 156,000 436,000
Net loss $(36,000)
A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.
Blossom has proposed a plan to get the partnership "out of the red" and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.30 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Blossom estimates that sales volume will increase by 25%. Compute the net income under Blossom's proposal and the break-even point in dollars.