Question

You have been provided with the following information regarding the ALG Mfg Company: S 25 Sales price Variable manufacturing cost per unit Variable marketing cost per unit Fixed manufacturing costs Fixed administrative costs 12 3 80,223 40,000 This information is based on forecasted sales of 25,000 units. (a) What are the expected operating profits for the upcoming year? (b) What is the break-even point in units? (c) What is the break-even point in dollars? (d) If $80,000 of operating profits is desired, how many units must be sold? (e) How much in sales dollars is required to generate an operating profit of $75,000?

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

Sales price= 25

Variable manufacturing cost per unit= 12

Variable marketing cost per unit= 3

Fixed manufacturing costs= 80,223

Fixed administrative costs= 40,000

This information is based on forecasted sales of 25,000 units.

A) Operating profit:

Sales= 25*25,000= $625,000

Variable costs= (15*25,000)= (375,000)

Fixed costs= (80,223 + 40,000)= (120,223)

Operating profit= $129,777

B) Break-even point= fixed costs/ contribution margin

Break-even point= 120,223/ (25 - 15)= 12,022 units

C) Break-even point (dollars)= fixed costs/ contribution margin ratio

Break-even point (dollars)= 120,223/ (10/25)= $300,557.5

D) Break-even point= (fixed costs + desire profit)/ contribution margin

Break-even point= (120,223 + 80,000) / 10= 20,022 units

E)  Break-even point (dollars)= (fixed costs + desire profit)/ contribution margin ratio

Break-even point (dollars)= (120,223 + 75,000) / (10/25)= $488,057.5