For the coming year, Sorkin Company anticipates a unit selling price of $88, a u
ID: 2477884 • Letter: F
Question
For the coming year, Sorkin Company anticipates a unit selling price of $88, a unit variable cost of $44, and fixed costs of $382,800.
Required:
1. Compute the anticipated break-even sales in units.
units
2. Compute the sales (units) required to realize income from operations of $193,600.
units
3. Construct a cost-volume-profit chart, assuming maximum sales of 17,400 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even.
4. Determine the probable income (loss) from operations if sales total 13,900 units. If required, use the minus sign to indicate a loss.
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Explanation / Answer
Selling Price $88 Variable costs $44 Contribution Margin - per unit $44 Fixed costs $3,82,800 1. Compute the anticipated break-even sales in units. Units Break even point (in Units) = Fixed Costs / Contribution Per Unit = $382800 / 44 8,700 2. Compute the sales (units) required to realize income from operations of $193,600. Sales in units = (Fixed costs + Net Income) / Contribution Margin per unit = ($382,800 + 193,600)/44 13,100 3.Construct a cost-volume-profit chart, assuming maximum sales of 17,400 units within the relevant range. From your chart, indicate whether each of the following sales levels would produce a profit, a loss, or break-even. Sales (in Units) Sales (in dollars) Variable cost Fixed costs Profit / (Loss) 12,200 $10,73,600 $5,36,800 $3,82,800 $1,54,000 10,900 $9,59,200 $4,79,600 $3,82,800 $96,800 8,700 $7,65,600 $3,82,800 $3,82,800 $0 6,500 $5,72,000 $2,86,000 $3,82,800 -$96,800 5,200 $4,57,600 $2,28,800 $3,82,800 -$1,54,000 4. Determine the probable income (loss) from operations if sales total 13,900 units. If required, use the minus sign to indicate a loss. Per Unit Total Sales - 13,900 units $88 $12,23,200 Variable costs $44 $6,11,600 Contribution Margin $44 $6,11,600 Less: Fixed Costs $3,82,800 Net Income / (Loss) $2,28,800