Please explain the steps Denny Manufacturing had a bad year in 2012. For the fir
ID: 2455398 • Letter: P
Question
Please explain the steps
Denny Manufacturing had a bad year in 2012. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 78,100 units of product: Net sales $1,491,710; total costs and expenses $1,728,700; and net loss $236,990. Costs and expenses consisted of the following.
Total
Variable
Fixed
Management is considering the following independent alternatives for 2013.
(a) Compute the break-even point in dollars for 2012. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
(b) Compute the break-even point in dollars under each of the alternative courses of action. (Round contribution margin ratio to 4 decimal places e.g. 0.2512 and final answers to 0 decimal places, e.g. 2,510.)
Break-even point
Total
Variable
Fixed
Cost of goods sold $1,207,900 $784,700 $423,200 Selling expenses 418,000 77,800 340,200 Administrative expenses 102,800 40,000 62,800 $1,728,700 $902,500 $826,200Explanation / Answer
Total Variable Fixed Cost of goods sold 1207900 784700 423200 Selling expenses 4,18,000 77,800 3,40,200 Administrative expenses 1,02,800 40,000 62,800 Total 17,28,700 9,02,500 8,26,200 (a) Net Sales 14,91,710 No. Of units sold 78,100 Selling price per units 19.10 Total Contribution = net sales - variable costs $5,89,210 PV ratio = contribution / sales 0.395 BEP in Dollars = fixed cost/PV ratio $2091701 (b) Revised selling price = 1.24 * 1491710 = $ 1849720.40 Revised contribution = $1849720.40-$902500 = $ 947220.40 Revised Contribution Margin Ratio = 0.5121 Revised BEP in dollars 1613393 Revised selling expenses Fixed = 340200 - 204300 + 38900 = $174800 Variable = 77800 + 5% of 1491710 = $152386 Revised total variable expenses = 902500 - 77800+152386 = $977086 Revised total fixed cost = 826200 - 340200 + 174800 = $$660800 Revised Contribution= 1491710 - 977086 = $514624 Revised contribution margin ratio = 514624/1491710 = 34.5% BEP in dollars = 660800 / 0.345 = $1915362 Revised Variable cost = 1728700/2 = $864350 Revised Fixed cost = $864350 Revised Contribution = 1491710 - 864350 = $627360 Revised contribution margin ratio = 627360 / 1491710 = 0.4206 Revised BEP in dollars = 864350/0.4206 = $2055040