Question:
BREAK-EVEN IN SALES DOLLARS, CHANGES IN VARIABLES
Lauterbach Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is as follows:
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Sales
|
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$1,500,000
|
|
Cost of sales:
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|
|
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Direct materials
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$250,000
|
|
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Direct labor
|
150,000
|
|
|
Variable overhead
|
80,000
|
|
|
Fixed overhead
|
100,000
|
580,000
|
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Gross profit
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$ 920,000
|
|
Selling and administrative expenses:
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|
|
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Variable
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$300,000
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|
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Fixed
|
250,000
|
550,000
|
|
Operating income
|
|
$ 370,000
|
Required:
1. What is the break-even point (rounded to the nearest dollar) for Lauterbach Corporation for the current year?
2. For the coming year, the management of Lauterbach Corporation anticipates a 10 percent increase in variable costs and a $45,000 increase in fixed expenses. What is the break-even point in dollars for next year?