Parkins Company produces and sells a single product. The company\'s income state
ID: 2355447 • Letter: P
Question
Parkins Company produces and sells a single product. The company's income statement for the most recent month isgiven 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.
What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?
What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses?
Explanation / Answer
New Sales = 1.25*6000 units = 7500 units Sales (7500 units at $40 per unit) $ 300,000 Less manufacturing costs: Direct materials (7500*48000/6000)=$ 60,000 Direct labor (7500*60000/6000)= 75,000 Variable factory overhead (7500*12000/6000)=15,000 Fixed factory overhead 30,000 180,000 Gross margin 120,000 Less selling and other expenses: Variable selling and other expenses (7500*24,000/6000)=30,000 Fixed selling and other expenses 42,000 72,000 Net operating income $ 48,000 SO new Net Income will be $48000