Construct a cost-volume-profit chart

Assignment Help Operation Management

Reference no: EM131841987

Problem: Break-Even Sales and Cost-Volume-Profit Chart

Last year, Gelbin Inc. had sales of $225,000, based on a unit selling price of $100. The variable cost per unit was $80, and fixed costs were $31,200. The maximum sales within Gelbin's relevant range are 2,800 units. Gelbin is considering a proposal to spend an additional $8,000 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.

Required: 1. Construct a cost-volume-profit chart on your own paper, indicating the break-even sales for last year. In your computations, do not round the contribution margin percentage.

Break-even sales (dollars)

Break-even sales (units)

2. Using the cost-volume-profit chart prepared in part (1), determine (a) the income from operations for last year and (b) the maximum income from operations that could have been realized during the year. In your computations, do not round the contribution margin percentage.

Income from operations

Maximum income from operations

3. Construct a cost-volume-profit chart (on your own paper) indicating the break-even sales for the current year, assuming that a noncancelable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. In your computations, do not round the contribution margin percentage.

Dollars

Units

4. Using the cost-volume-profit chart prepared in part (3), determine

(a) the income from operations if sales total 2,250 units and

(b) the maximum income from operations that could be realized during the year. In your computations, do not round the contribution margin percentage.

Income from operations at 2,250 units

Maximum income from operations

Reference no: EM131841987

Questions Cloud

Briefly describe the types of business structures : Briefly describe the four types of business structures that can be used to organize agribusinesses and farms. List the similarities and differ- ences.

Briefly describe the function of the joint commission : Briefly describe the function of the Joint Commission. How does it measure and ensure quality in an organization?

What will agape awareness level be next year : Brand managers know that increasing promotional budgets eventually result in diminishing returns. The first one million dollars typically results.

What is the maximum possible dividend payout rate the firm : What is the maximum possible dividend payout rate the firm can maintain without resorting to additional equity issues?

Construct a cost-volume-profit chart : Construct a cost-volume-profit chart on your own paper, indicating the break-even sales for last year. In your computations, do not round the contribution.

What is the expected profit of granting credit : What is the expected profit of granting credit? Should Cast Iron grant or refuse credit?

Show the revenue-cost and profit for each option : Brandon Production is a small firm focused on the assembly and sale of custom computers. The firm is facing stiff competition from low-priced alternatives.

When calculating the weighted average cost of capital : When calculating the weighted average cost of capital, firms should include the cost of accounts payable.

What are the expected cash collections in months : What are the expected cash collections in months 3 and 4?

User Account

All Pages