Perkins company produces and sells a single product. The Company's income statement for the most recent month is given below:
|
Sales (15,000 units at $32 per unit)
|
|
$480,000
|
|
Less variable costs:
|
|
Direct materials (variable)
|
$67,500
|
|
|
Direct labor (variable)
|
75,000
|
|
|
Variable factory overhead
|
50,000
|
|
|
Variable selling and other expenses
|
40,000
|
232,500
|
|
Contribution margin
|
|
247,500
|
|
Less fixed expenses:
|
|
Fixed factory overhead
|
75,000
|
|
|
Fixed selling and other expenses
|
45,000
|
120,000
|
|
Net operating income
|
|
$127,500
|
There are no beginning or ending inventories.
Required:
- Compute the company's break-even point in units and sales dollars.
- What would the company's monthly net operating income be if sales and total variable costs increased by 25% and total fixed factory overhead dopped by $30,000?
- What total level of sales (in Units)must the company achieve in order to earn a target profit of $45,000?
- The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 50 percent, but it will double the costs for fixed factory overhead. Every other cost remains unchanged. Compute the new break-even point in units.