80.2K

Verified Solution

Link Copied!

Based on the relationships in CVP Limited's 2020 Income Statement, answer each of the following for questions. Each question is independent of the others.

1. Calculate the breakeven point in Units. Round any partial units up. (2 marks)
2. Calculate the sales dollars rounded to the nearest dollar needed to increase operating income by $100,000. Ignore minor rounding difference in your answer. - i.e. increase operating income by $99,950 to $100,050. (2 marks)
3. To the nearest dollar what would sales revenue need to be to earn net income of $175,000. Ignore minor rounding differences - i.e. net income can range from $149,900 to $150,100 (3 marks)
4. Assuming there will be no interest expense, determine the necessary units to be produced and sold to earn net income of $150,000. Ignore minor rounding differences - i.e. round up the units to be within the range from $149,900 to $150,100. (3 marks)

CVP Limited Income Statement for the Year Ended December 31, 2020

Units produced and sold

Sales

Direct Material

Direct Labour

Variable Manufacturing Overhead

Fixed Manufacturing Overhead

Gross Margin

Fixed Selling General and Administrative Expense

Variable Selling General and Administrative Expense

Operating Income

Interest Expense

Net Income before Taxes

Income Tax Expense at 30% Rounded

Net Income

10,000

$1,000,000

200,000

150,000

50,000

225,020

374,980

125,000

50,000

199,980

50,000

149,980

45,000

$104,980

Answer & Explanation Solved by verified expert

See Answer