$1$ Assignment

Question $6,$ E$3-25($similar to$)$

HW Score: $52\mathrm{.}19\%,52\mathrm{.}19$ of $100$ points

Part $5$ of $9$

Points: $7\mathrm{.}5$ of $15$

The Doral Company manufactures and sells pens. Currently, $5,200,000$ units are sold per year at $$0\mathrm{.}50$ per unit. Fixed costs are $$900,000$ per year. Variable costs are $$0\mathrm{.}30$ per unit.

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Requirements

Consider each case separately:

a$.$ What is the current annual operating income?

b$.$ What is the current breakeven point in revenues?

Compute the new operating income for each of the following changes:

A $$0\mathrm{.}10$ per unit increase in variable costs

A $10\%$ increase in fixed costs and a $10\%$ increase in units sold

A $30\%$ decrease in fixed costs, a $30\%$ decrease in selling price, a $20\%$ decrease in variable cost per unit, and a $40\%$ increase in units sold

Compute the new breakeven point in units for each of the following changes:

A $10\%$ increase in fixed costs

A $10\%$ increase in selling price and a $$20,000$ increase in fixed costs