Explore BrainMass

Explore BrainMass

    determine the amount of sales (units) for target profit

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Battonkill Company, operating at full capacity, sold 112,800 units at a price of $150 per unit during 2010. Its income statement for 2010 is as follows:
    sales 16,920,000
    cost of good sold 6,000,000
    gross profit 10,920,000
    selling expenses 3,000,000
    administrative expenses 1,800,000
    total expenses 4,800,000
    income from operations 6,120,000

    The division of costs between fixed and variable is as follows:
    Fixed Variable
    cost of sales 40% 60%
    selling expenses 50% 50%
    administrative expenses 70% 30%

    Management is considering a plant expansion program that will permit an increase of $1,500,000 in yearly sales. the expansion will increase fixed costs by $200,000 but will not affect the relationship between sales and variable costs.

    1) Determine for 2010 the total fixed costs and the total variable costs.
    2) Determine for 2010 (a) the unit variable cost and (b) the unit contribution margin
    3) compute the break-even sales (units) for 2010
    4) compute the break-even sales (units) under the proposed program
    5) determine the amount of sales (units) that would be necessary under the proposed program to realize the $6,120,000 of income from operations that was earned in 2010
    6) determine the maximum income from operations possible with the expanded plant
    7) if the proposal is accepted and sales remain at the 2010 level, what will the income or loss from operations be for 2011:
    8) based on the data given, would you recommend accepting the proposal:

    © BrainMass Inc. brainmass.com June 4, 2020, 12:57 am ad1c9bdddf
    https://brainmass.com/business/accounting/370420

    Solution Summary

    This is a classic problem! The work is done for you in so you can see the formula in the cells and have a template for other work. A comment is added to signal the part that most students get wrong.

    $2.19

    ADVERTISEMENT