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Posted by: Homeworkhelp
Price Quoted by Student: $6
Posted On: 2011-02-21 03:03:47
 
Question

Castellino Company, operating at full capacity, sold 80000 units at a price of $70.75 per unit during 2008. Its income statement for 2008 is as follows:
Sales 5,660,000
Cost of goods sold 2,100,000
Gross profit 3,560,000
Expenses:
Selling 1,500,000
Admin. 900,000
Total expenses..........2,400,000
Income from operations 1,160,000

The division of costs between fixed and variable is as follows:
Cost of Sales: fixed = 50% variable = 50%
selling expenses: fixed = 30% variable = 70%
Administrative expenses: fixed = 60% variable = 40%

Management is considering a plant expansion program that will permit an increase of $884,375 in yearly sales. The expansion will increase fixed costs by $265,000, but will not affect the relationship between sales and variable costs.

1. Determine for 2008 the total fixed costs and the total variable costs.
2. Determine for 2008 (a) the unit variable cost and (b) the unit contribution margin.
3. Compute the break-even sales (units) for 2008.
4. Compute the break-even sales (units) under the proposed program.
5. Determine the amount of sales (units) that would be necessary under the proposed program to realize the $1,160,000 of income from operations that was earned in 2008.
6. Determine the maximum income from operations possible with the expanded plant.

 


Solutions
1. Determine for 2008 the total fixed costs and th
Price $6
Attachment 1: Castellino Company, operating.doc
Solution Posted By: Homeworkhelp    Posted on: 21-02-2011