Reference no: EM132432012

Question -

Part A) Bravo Company sells Widgets at $6 a unit. In FY 2016, fixed costs are expected to be $200,000 and variable costs are estimated to increase from $3 per unit to $4 a unit. Bravo wants to have a FY 2016 operating income of $40,000. Use this information to make an example of the number of units of Widgets that Bravo must sell in FY 2016 to meet this goal.

Part B) During FY 2016, Bravo Company plans to sell Widgets for $5.00 a unit. Current variable costs are $3.00 a unit and fixed costs are expected to increase to a total of $100,000. Use this information to determine for FY 2016:

1. The number of units of Widgets for Bravo to breakeven.

2. The total dollar value of sales that Bravo must achieve to breakeven.

Part C) For FY 2016 Bravo Company's CVP format Income Statement is as follows:

Bravo Company Income Statement (CVP format) For the Year Ended 12/31/16

Sales (100 units) $10,000

Variable Costs:

Direct Labor $1,500

Direct Materials 1,400

Factory Overhead (variable) 1,000

Selling Expenses (variable) 600

Administrative Expenses (variable) 500

Total Variable Expenses 5,000

Contribution Margin $5,000

Fixed Costs:

Factory Overhead (fixed) $500

Selling Expenses (fixed) 1,000

Administrative Expenses (fixed) 1,000

Total Fixed Expenses 2,500

Net Income (aka Operating Income) $2,500

Bravo utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Bravo Company expects that all costs will remain the same for FY 2017 with the exception of fixed factory overhead which is budgeted to increase by $1,700. Use this information to determine:

1. FY 2016 Cost of Goods Sold

2. FY 2016 breakeven point in units.