The Doral Company manufactures and sells pens. Present sales output is 5,000,000 units per year at a selling price of $0.60 per unit. Fixed costs are $1,080,000 per year. Variable costs are $0.36 per unit.
REQUIRED
1. a. What is the present operating income for a year?
b. What is the present breakeven point in revenue?
2. Compute the new operating income for each of the following changes:
a. A $0.048 per unit increase in variable costs.
b. A 10% increase in fixed costs and a 10% increase in units sold.
c. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable costs per unit, and a 40% increase in units sold.
3. Compute the new breakeven point in units for each of the following changes:
a. A 10% increase in fixed costs.
b. A 10% increase in selling price and a $24,000 increase in fixed costs.