Morrel CoProduces and Sells a Single Product There Are No Beginning or Ending Inventories

question 126

Essay

Morrel Co.produces and sells a single product.The company's income statement for the most recent month is given below:
$$\begin{array} { | l | r | r | } \hline \text { Sales (6,000 units at } \$ 40 \text { per unit) } & & \$ 240,000 \\\hline \text { Less manufacturing costs: } & & \\\hline \text { Direct materials } & \$ 48,000 & \\\hline \text { Direct labor (variable) } & 60,000 & \\\hline \text { Variable factory overhead } & 12,000 & \\\hline \text { Fixed factory overhead } & \underline { 30,000} & \underline { 150,000 }\\\hline \text { Gross margin } & & 90,000 \\\hline \text { Less selling and other costs: } & & \\\hline \text { Variable selling and other costs } & 24,000 & \\\hline \text { Fixed selling and other costs } & 42,000 & 66,000 \\\hline \text { Operating profit } & & \underline { \$ 24,000 }\\\hline\end{array}$$
There are no beginning or ending inventories.Required:
a.Compute the company's monthly break-even point in units of product.b.What would the company's monthly operating profit be if sales increased by 25% and there is no change in total fixed costs?
c.What dollar sales must the company achieve in order to earn an operating profit of $50,000 per month?
d.The company has decided to automate a portion of its operations.The change will reduce direct labor costs per unit by 40 percent,but it will double the costs for fixed factory overhead.Compute the new break-even point in units.

---

Definitions:

Volume Control Burette Device

A medical device used to deliver a fixed volume of IV fluid at a predetermined rate, usually equipped with a chamber that can be filled with a precise volume of fluid.

IVPB

Intravenous piggyback, a method of delivering medication through an IV where a secondary medication bag is connected.

Milliliters Per Hour

A measurement of fluid flow rate, indicating how many milliliters of fluid pass through a given point in one hour.

Medicated IVPB

Intravenous piggyback, a method of delivering medication that is diluted in a small amount of fluid and infused through an intravenous line.