Reference no: EM132561729

The Income statement for one of Manhattan Company's products shows:

Sales (100 units at $100 a unit)...................................................$10,000

Cost of goods sold:

Direct labor................................................................. $1500

Direct material used...................................................... 1,400

Variable Factory Overhead.............................................. 1,000

Fixed Factory Overhead.................................................. 500

Total cost of goods sold......................................... 4,400

Gross Profit.......................................................................... $5,600

Marketing Expenses:

Variable..................................................................... $600

Fixed......................................................................... 1,000

Administrative Expenses

Variable .................................................................... 500

Fixed........................................................................ 1000

Total Marketing and administrative Expenses................ 3,100

Operating Income................................................................... 2500

Instructions:

Question 1. Determine the Break-even point in units and explain how this breakeven is important for the company in deciding to continue or discontinue the manufacturing of the product if the sales level is not reaching the breakeven point?

Question 2. What will be the impact on operating income if the company increases the sales by 25% (explain and determine the new income ; and

Question 3. Explain and then determine the impact on Break-even point in dollars if the company fixed factory overheads increase by $1700?