The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the Snooper. Cost and revenue
Question:
The Bruggs & Strutton Company manufactures an engine for carpet cleaners called the "Snooper." Cost and revenue data for the "Snooper" are given below, based on sales of 40,000 units.
Sales .......... 1,600,000
Less: Cost of goods sold ... 1,120,000
Gross margin ........$ 480,000
Less: Operating expenses ... 100,000
Operating income before taxes ..$ 380,000
Cost of goods sold consists of $800,000 of variable costs and $320,000 of fixed costs. Operating expenses consist of $40,000 of variable costs and $60,000 of fixed costs.
Required:
A. Calculate the break-even point in units and sales dollars.
B. Bruggs & Strutton received an order for 6,000 units at a price of $25.00. There will be no increase in fixed costs, but variable costs will be reduced by $0.54 per-unit because of cheaper packaging. Determine the projected increase or decrease in profit from the order.
C. Bruggs also received an order for 2,500 units at $29 per unit. If packaging costs will not be reduced on this order and only one order ("B" or "C") can be accepted, which order is more attractive?
Step by Step Answer:
Cost Management Accounting and Control
ISBN: 978-0324559675
6th Edition
Authors: Don R. Hansen, Maryanne M. Mowen, Liming Guan