*ONLY ANSWER PART C ***

The condensed budgeted income statement for the Phan and Nguyen partnership for 2020 is as follows:

PHAN AND NGUYEN LLP Income Statement Year Ending December 31, 2020
Sales (240,000 units)				$1,200,000
Cost of goods sold				800,000
Gross profit				400,000
Operating expenses
Selling		$280,000
Administrative		150,000		430,000
Net loss				$(30,000)

A cost behaviour analysis indicates that 75% of the cost of goods sold is variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable. (Use the CVP income statement format in calculating profits.)

(a)

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Calculate the break-even point in total sales dollars and in units for 2020. (Round contribution margin per unit to 1.25, contribution margin ratio to 1 decimal place, e.g. 15.2% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$
Break-even point in units

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(b)

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Phan has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Phan estimates that sales volume will increase by 25%. Calculate the break-even point in total sales dollars and in units under the proposed plan. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$
Break-even point in units

What effect would Phans plan have on the partnerships profits and its break-even point in dollars?

This plan would have nohave effect on the break-even point in units, but decreasesincreases break-even point in sales dollars because of the higherlower selling price.

It decreasesincreases the operating profit before tax from a lossprofit of $ to a lossprofit of $ .

Attempts: 1 of 1 used

(c)

Nguyen was a marketing major in university. He believes that the sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Phans: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by $0.25, and (3) increase fixed selling expenses by $40,000. Nguyen quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Calculate Nguyens break-even point in dollars and units. (Round contribution margin per unit and contribution margin ratio to 2 decimal places, e.g. 15.25 or 15.25% and final answers to 0 decimal places, e.g. 5,275.)

Break-even point in sales		$
Break-even point in units

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