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# Parkins Company produces and sells a single product- The company-'s mo.docx

Parkins Company produces and sells a single product. The company\'s most recent income statement is given below: Note: When it says \'\'Variable Factory Overhead\'\' it is a variable cost though it is termed as Factory Overhead. The same is true with Selling and other expenses. THERE ARE NO BEGINNING AND ENDING INVENTORIES. REQUIRED: Answer any three of the four questions below: a. Compute the company\'s monthly break-even point in units of product. b. What would the company\'s monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses? c. What dollar sales must the company achieve in order to earn a net operating income of \$50,000 per month? d. The company has decided to automate a portion of its operations. The change will reduce direct labor cost per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units.
Solution
Total Variable Expenses = 48000 + 60000 + 12000 + 24000 = \$144,000
Contribution Margin Ratio = (Sales - Total Variable Expenses)/Sales
= (240000
.

Parkins Company produces and sells a single product. The company\'s most recent income statement is given below: Note: When it says \'\'Variable Factory Overhead\'\' it is a variable cost though it is termed as Factory Overhead. The same is true with Selling and other expenses. THERE ARE NO BEGINNING AND ENDING INVENTORIES. REQUIRED: Answer any three of the four questions below: a. Compute the company\'s monthly break-even point in units of product. b. What would the company\'s monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses? c. What dollar sales must the company achieve in order to earn a net operating income of \$50,000 per month? d. The company has decided to automate a portion of its operations. The change will reduce direct labor cost per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break-even point in units.
Solution
Total Variable Expenses = 48000 + 60000 + 12000 + 24000 = \$144,000
Contribution Margin Ratio = (Sales - Total Variable Expenses)/Sales
= (240000
.

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### Parkins Company produces and sells a single product- The company-'s mo.docx

1. 1. Parkins Company produces and sells a single product. The company's most recent income statement is given below: Note: When it says ''Variable Factory Overhead'' it is a variable cost though it is termed as Factory Overhead. The same is true with Selling and other expenses. THERE ARE NO BEGINNING AND ENDING INVENTORIES. REQUIRED: Answer any three of the four questions below: a. Compute the company's monthly break-even point in units of product. b. What would the company's monthly net operating income be if sales increased by 25% and there is no change in total fixed expenses? c. What dollar sales must the company achieve in order to earn a net operating income of \$50,000 per month? d. The company has decided to automate a portion of its operations. The change will reduce direct labor cost per unit by 40 percent, but it will double the costs for fixed factory overhead. Compute the new break- even point in units. Solution Total Variable Expenses = 48000 + 60000 + 12000 + 24000 = \$144,000 Contribution Margin Ratio = (Sales - Total Variable Expenses)/Sales = (240000