5.) Emerald, Inc, produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows: Sales................................... $540,000 Variable expenses.............. 360,000 Contribution margin.......... 180,000 Fixed expenses................... 120,000 Net operating income........ $ 60,000 The company produced and sold 120,000 kilograms of product during the month. There was no beginning or ending inventories. Required: 5.1) Given the present situation, compute The break-even sales in kilograms. The break-even sales in dollars. The sales in kilograms that would be required to produce net operating income of $90,000. The margin of safety in dollars.
5.) Emerald, Inc, produces a single product. The results of the company's operations for a typical month are summarized in contribution format as follows:
|
|
Sales................................... |
$540,000 |
|
|
Variable expenses.............. |
360,000 |
|
|
Contribution margin.......... |
180,000 |
|
|
Fixed expenses................... |
120,000 |
|
|
Net operating income........ |
$ 60,000 |
The company produced and sold 120,000 kilograms of product during the month. There was no beginning or ending inventories.
Required:
5.1) Given the present situation, compute
- The break-even sales in kilograms.
- The break-even sales in dollars.
- The sales in kilograms that would be required to produce net operating income of $90,000.
- The margin of safety in dollars.
5.2) An important part of processing is performed by a machine that is currently being leased for $20,000 per month. The company has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease.
- Should the company choose the lease or the royalty plan?
- Under the royalty plan compute break-even point in kilograms.
- Under the royalty plan compute break-even point in dollars.
- Under the royalty plan determine the sales in kilograms that would be required to produce net operating income of $90,000.
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