The condensed income statement for the Blossom and Paul partnership for 2020 is as follows. Sales (240,000 units) $1,200,000 Cost of goods sold 800,000 Gross profit 400,000 Operating expenses Selling $280,000 Administrative 156,000 436,000 Net loss $(36,000 )

A cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable.

1) Compute the break-even point in total sales dollars for 2020.

2) Blossom 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 $0.30 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Blossom estimates that sales volume will increase by 25%. Compute the net income under Blossom's proposal and the break-even point in dollars

Answer rating: 100% (QA)

1 Compute the breakeven point in total sales dollars for 2020 First lets calculate the variable costs for each category Cost of goods sold COGS Variab... View the full answer