Sep 19, 2017

CASCADE & CHINOOK COMPANY PRODUCES AND SELLS A SINGLE PRODUCT. THE COMPANY’S INCOME STATEMENT…

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Cascade & Chinook Company produces and sells a single product. The company’s income statement for the most recent month is given below: Sales (15,000 units at $29 per unit) $325,000 Less variable costs: Direct materials (variable) $60,000 Direct labor (variable) 75,000 Variable factory overhead 45,000 Variable selling and other expenses 30,000 210,000 Contribution margin 225,000 Less selling and other expenses: Fixed factory overhead 100,000 Fixed selling and other expenses 85,000 185,000 Net operating income $ 40,000 There are no beginning or ending inventories. Required: a. Compute the company’s monthly break-even point in units and sales dollars. b. What would the company’s monthly net operating income be if sales and variable costs increased by 30% and total fixed factory overhead dropped by $25,000? c. What total level of sales (in units) must the company achieve in order to earn a target profit of $145,000 ? d. The company has decided to automate a portion of its operations. The change will reduce direct labor costs per unit by 50 percent, but it will double the costs for fixed factory overhead. Every other cost remains unchanged. Compute the new break-even point in units.


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