What dollar sales must the company achieve in order to earn a net operating income of $50,000 per…

Parkins Company produces and sells a single product. The company”s income statement for the most recent month is given below:

Sales (6,000 units at $40 per unit)

  $240,000

 

Less manufacturing costs:

 

 

Direct materials

$48,000

 

Direct labor (variable)

60,000

 

Variable factory overhead

12,000

 

Fixed factory overhead

30,000

150,000

Gross margin

 

90,000

Less selling and other expenses:

 

 

Variable selling and other expenses

24,000

 

Fixed selling and other expenses

42,000

66,000

Net operating income

 

$ 24,000

There are no beginning or ending inventories.

Required:

a. Compute the company”s monthly break-even point in units of product.

b. What would the company”s monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?

c. What dollar sales must the company achieve in order to earn a net operating income of $50,000 per month?

d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units.

"Get 15% discount on your first 3 orders with us"
Use the following coupon
FIRST15

Order Now