Explore BrainMass

Explore BrainMass

    Bruggs & Strutton Company

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

    The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.

    Sales $1,600,000
    Less: Cost of goods sold 1,120,000
    Gross margin $ 480,000
    Less: Operating expenses 100,000
    Operating income before taxes $ 380,000

    Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs. Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.

    Required:
    A. Calculate the break-even point in units and sales dollars.
    B. Calculate the safety margin.
    C. Bruggs & Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order.
    D. Bruggs also received an order for 2,500 units at $29 per unit. If packaging costs will not be reduced on this order and only one order ("C" or "D") can be accepted, which order is more attractive?

    © BrainMass Inc. brainmass.com June 3, 2020, 7:52 pm ad1c9bdddf
    https://brainmass.com/business/financial-ratios/bruggs-strutton-company-115215

    Solution Preview

    The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper."
    Cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.

    Sales 1,600,000
    Less: Cost of goods sold 1,120,000
    Gross margin $ 480,000
    Less: Operating expenses 100,000
    Operating income before taxes $ 380,000

    Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs.
    Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.

    Required:
    A. Calculate the break-even point in units and sales ...

    Solution Summary

    This solution is comprised of a detailed explanation to calculate the break-even point in units and sales dollars and the safety margin, determine the projected increase or decrease in profit from the order, and answer which order is more attractive.

    $2.19

    ADVERTISEMENT