70.2K

Verified Solution

Link Copied!

Questions

Based on the relationships in CVP Limiteds 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)

Data Set

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

Units produced and sold	10,000
Sales	$1,000,000
Direct Material	200,000
Direct Labour	150,000
Variable Manufacturing Overhead	50,000
Fixed Manufacturing Overhead	225,020
Gross Margin	374,980
Fixed Selling General and Administrative Expense	125,000
Variable Selling General and Administrative Expense	50,000
Operating Income	199,980
Interest Expense	50,000
Net Income before Taxes	149,980
Income Tax Expense at 30% Rounded	45,000
Net Income	$104,980

Answer & Explanation Solved by verified expert

See Answer