Chapter 21 Accounting
| Ballywide Company, operating at full capacity, sold 92,240 units at a price of $140 per unit during 2013. Its income | |||||||||||||||||||||||
| statement for 2013 is as follows: | |||||||||||||||||||||||
| Sales | 12,913,600 | ||||||||||||||||||||||
| Cost of goods sold | 5,000,000 | ||||||||||||||||||||||
| Gross profit | 7,913,600 | ||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Selling expenses | 2,800,000 | ||||||||||||||||||||||
| Administrative expenses | 1,720,000 | ||||||||||||||||||||||
| Total expenses | 4,520,000 | ||||||||||||||||||||||
| Income from operations | 3,393,600 | ||||||||||||||||||||||
| The division of costs between fixed and variable is as follows: | |||||||||||||||||||||||
| Fixed | Variable | ||||||||||||||||||||||
| Cost of Sales | 45% | 55% | |||||||||||||||||||||
| Selling expense | 55% | 45% | |||||||||||||||||||||
| Administrative expense | 65% | 35% |
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| a. Determine for 2013 the total fixed costs and the total variable costs. | b. Determine for 2013 (1) the unit variable cost and (2) the unit contribution margin. | c. Compute the breakâ€even sales in units for 2013. | d. Compute the breakâ€even sales in units under the proposed program. | f. Determine the maximum income from operations possible with the expanded plant. | h. Based on the data given, would you recommend accepting the proposal? | e. Determine the amount of sales in units that would be necessary under the proposed program to realize the | $3,393,600 of income from operations that was earned in 2013. | g. If the proposal is accepted and sales remain at the 2013 level, what will the income or loss from operations be for | 2014? | ||||||||||||||
