Preppy CoMakes and Sells a Single Product

question 26

Essay

Preppy Co.makes and sells a single product.The current selling price is $30 per unit.Variable costs are $21 per unit, and fixed expenses total $90,000 per month.Sales volume for July totaled 12,000 units.
a.Calculate the operating income for July.
b.Calculate the breakeven point in units sold and total revenues.
c.Management is considering the use of automated production equipment.If this were done, variable costs would drop to $15.00 per unit, but fixed expenses would increase to $100,000 per month.
1.Calculate operating income at a volume of 12,000 units per month with the new cost structure.
2.Calculate the breakeven point in units with the new cost structure.

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Definitions:

Interest Rate

The proportion of a loan or savings amount paid as interest to the lender or paid to the saver, usually expressed as an annual percentage.

Compensation Strategy

A company’s plan or approach towards designing and implementing payment structures and benefits for its employees.

Formulating

The process of devising or developing strategies, plans, or policies.

Process

A series of actions or steps taken in order to achieve a particular end.