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The Westover Company manufactures and sells pens. Present sales output is 5,300,000 units per year at a selling price...

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Question

Accounting

The

Westover

Company manufactures and sells pens. Present sales output is

5,300,000

units per year at a selling price of

$0.50

per unit. Fixed costs are

$910,000

per year. Variable costs are

$0.30

per unit.Required

LOADING...

Requirement 1.? (a) What is the present operating income for a?year?

Start by determining the formula to calculate operatingincome.

[

Units sold

x (

Selling price

-

Variable costs

) ] -

Fixed costs

=

Operating income

The current annual operating income is

?$150000150000.

Requirement 1.? (b) What is the present breakeven point in?revenues?

Determine the formula to calculate the breakeven point inrevenues.

Breakeven units

x

Selling price

=

Breakeven revenues

The present breakeven point in revenues equals

?$22750002275000.

?(Hold all decimals in interim calculations. Round your finalanswer to the nearest whole? dollar.)

Requirement 2. Compute the new operating income or loss forcases? a, b, and c. ?(Use parentheses or a minus sign to show anoperating? loss.)

a. A

$0.05

per unit increase in variable costs results in a new operatingincome or loss of

?$(115,000)(115,000).

b. A

10?%

increase in fixed costs and a

10?%

increase in units sold results in a new operating income or lossof

?$nothing.

please send me the whole answer

Answer & Explanation Solved by verified expert
3.6 Ratings (456 Votes)

Requirement 1(-a)- Westoveer company Manufactures
( Units sold x ( Selling price - Variable costs ) ) - Fixed costs = Operating income
( 5300000 x ( $0.50 - $0.30 ) ) - 910000 = $150,000
Requirement 1(b)
Breakeven units X Selling Price = Breakeven revenues
4550000 X $0.50 = $2,275,000
* Breakeven Unit = Fixed Cost/ Contribution Margin per Unit
=910000/(0.5-0.3)=4550000 Unit
Requirement -2 (a)), in Case of increase in Variable Cost
Sales Reveue (5300000*0.50) $2,650,000.00
Less: Variable Cost
(5300000*(0.30+0.05))		 $1,855,000.00
Contribution Margin $795,000.00
Less; Fixed Cost $910,000.00
Net Operating Income -$115,000.00
Requirement -2 (b), in Case of increase in Fixed Cost & Unit Sold
Sales Reveue (5300000**1.10*0.50) $2,915,000.00
Less: Variable Cost
(5300000*1.10*0.30)		 $1,749,000.00
Contribution Margin $1,166,000.00
Less; Fixed Cost (910000*1.10) $1,001,000.00
Net Operating Income $165,000.00

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