Toler Company sells flags with team logos. Toler has fixed costs of $260,000 per year plus variable costs of $6.50 per flag. Each flag sells for $13.00.

Part 1

Requirement 1. Use the equation approach to compute the number of flags

Toler

must sell each year to break even.

First, select the formula to compute the required sales in units to break even.

Net sales revenue

-

Variable costs

-

Fixed costs

=

Target profit

Part 2

Rearrange the formula you determined above and compute the required number of flags to break even.

The number of flags Toler must sell each year to break even is

40,000

.

Part 3

Requirement 2. Use the contribution margin ratio approach to compute the dollar sales

Toler

needs to earn

$6,500

in operating income for the year. (Round the contribution margin ratio to two decimal places.)Begin by showing the formula and then entering the amounts to calculate the required sales dollars to earn

$6,500

in operating income. (Round the required sales in dollars up to the nearest whole dollar. For example, $10.25 would be rounded to $11. Abbreviation used: CM = contribution margin.)

(

Fixed costs

+

Target profit

)

CM ratio

=

Required sales in dollars

Part 4

(

$260,000

+

$6,500

)

50.00

%

=

$533,000

Part 5

Requirement 3. Prepare

Toler's

contribution margin income statement for the year ended

December

31,

for sales of

33,000

flags. (Round your final answers up to the next whole number.) (Use parentheses or a minus sign for an operating loss.)

Toler Company
Contribution Margin Income Statement
Year Ended December 31, 20XX
Sales Revenue	$429,000
Variable Costs	214,500
Contribution Margin	214,500
Fixed Costs	260,000
Operating Income (Loss)	$(45,500)

Part 6

Requirement 4. The company is considering an expansion that will increase fixed costs by 20% and variable costs by $1.30 per flag. Compute the new breakeven point in units and in dollars. Should Toler undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.) (Use the equation approach.)

Begin by selecting the formula to compute the required sales in units to break even under the expansion plan.

Net sales revenue

-

Variable costs

-

Fixed costs

=

Target profit

Part 7

Rearrange the formula you determined above and compute the required number of flags to break even under the expansion plan.

Under the expansion plan, the breakeven point in units

Solve for flags (requirement 4) and does Chegg doesn't allow replies on questions anymore?

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