Determine the operating profit company

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Reference no: EM13535025

Company Y was on track to sell 550,000 units in the year, but late in the year, a major customer canceled a large order for 50,000 units. The business reduced its production output to 500,000 units, as you see in table. Determine the operating profit Company Y would have earned if it had manufactured and sold 550,000 units in the year.

 

Company Y

Company Z

Operating Profit Report for Year

Per Unit

Totals

Per Unit

Totals

Sales volume, in Units

 

500,000

 

2,000,000

Sales Revenue

$85.00

$42,500,000

$25.00

$50,000,000

Cost of Goods Sold Expense (see below)

-56

-28,000,000

-18.45

-36,900,000

Gross Margin

$29.00

$14,500,000

$6.55

$13,100,000

Variable Operating Expenses

-12.5

-6,250,000

-2.5

-5,000,000

Contribution Margin

$16.50

$8,250,000

$4.05

$8,100,000

Fixed Operating Expenses

 

-5,000,000

 

-7,500,000

Operating Profit

 

$3,250,000

 

$600,000

Manufacturing Activity Summary for Year

Per Unit

Totals

Per Unit

Totals

Annual Production Capacity, in Units

 

800,000

 

2,500,000

Actual Output, in Units

 

500,000

 

2,500,000

Raw Materials

$15.00

$7,500,000

$7.50

$18,750,000

Direct Labor

20

10,000,000

2.75

6,875,000

Variable Manufacturing Overhead Costs

5

2,500,000

5

12,500,000

Total Variable Manufacturing Costs

$40.00

$20,000,000

$15.25

$38,125,000

Fixed Manufacturing Overhead Costs

16

8,000,000

3.2

8,000,000

Product Cost and Total Manufacturing Costs

$56.00

$28,000,000

$18.45

$46,125,0

Reference no: EM13535025

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