Reference no: EM132762840
Problem - Break-even sales and cost-volume-profit chart - Last year, Hever Inc. had sales of $500,000, based on a unit selling price of $250. The variable cost per unit was $175, and fixed costs were $75,000. The maximum sales within Hever Inc.'s relevant range are 2,500 units. Hever Inc. is considering a proposal to spend an additional $33,750 on billboard advertising during the current year in an attempt to increase sales and utilize unused capacity.
Instructions -
1. Construct a cost-volume-profit chart indicating the break-even sales for last year. Verify your answer, using the break-even equation.
2. Using the cost-volume-profit chart prepared in part (1), determine
(a) the operating income for last year. Verify your answers using the mathematical approach to cost-volume-profit analysis.
(b) the maximum operating income that could have been realized during the year. Verify your answers using the mathematical approach to cost-volume-profit analysis.
3. Construct a cost-volume-profit chart indicating the break-even sales for the current year, assuming that a noncancellable contract is signed for the additional billboard advertising. No changes are expected in the unit selling price or other costs. Verify your answer, using the break-even equation.
4. Using the cost-volume-profit chart prepared in part (3), determine
(a) the operating income if sales total 2,000 units. Verify your answers using the mathematical approach to cost-volume-profit analysis.
(b) the maximum operating income that could be realized during the year. Verify your answers using the mathematical approach to cost-volume-profit analysis.
|
How much net profit was earned during the period
: At the end of the period was $175,000, and drawings by the owner during the period were $30,000, how much net profit was earned during the period?
|
|
Determine estimated units of sales of the overall product
: Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year
|
|
Which the error will result in
: The bookkeeper recorded wages for the month as a decrease to the Income account rather than as an increase to Wages Expense. This error will result in
|
|
Calculate the present value of the note receivable
: On January 1, 2018, London Inc. sold $932,000 worth of goods to Sarnia Ltd. It was determined that Sarnia Inc. had poor credit and signed a three year.
|
|
Construct a cost-volume-profit chart
: Construct cost-volume-profit chart indicating break-even sales for current year, assuming that noncancellable contract is signed for the additional advertising
|
|
Find which is an asset
: Which of these is an asset? Interest earned on investments. / Asset revaluation reserve. / Income received in advance. Income tax payable
|
|
What expense does lincoln report in the first year
: Pittston County has an empty school building with a net book value of $700,000 and a remaining life of 10 years with no expected residual value.
|
|
Compute the sales required to realize a target profit
: Cleves Company anticipates a unit selling price of $100, a unit variable cost of $60, and fixed costs of $480,000. Compute the sales required to realize profit
|
|
What owner equity at the end of the period was
: What Owner equity at the end of the period was? ABC Restaurant started the year with total assets of $60,000 and total liabilities of $40,000.
|