Artistic Woodcrafting Inc. cabinet shop. The offer two grades of cabinet Grade I and Grade II
Last year $850,000 sales volume, First 6 months this year $600,000 and sales expected to be $1.6 billion for the entire year.
The average unit selling prices, unit, variable costs, and direct cost are as follows:
- Grade I - Unit Price 3,400 Unit variable cost 2,686 Direct fixed cost 95,000
- Grade II - Unit Price 1,600 Unit variable cost 1,323 Direct fixed cost 95,000
- Common fixed cost (fixed cost not traceable to either cabinet) are $35,000
- Currently for every 3 Grade I sold, 7 Grade II are sold.
1. Calculate the number of Grade 1 and Grade II cabinets expected to be sold during current year.
2. Calculate the number of Grade I and Grade II cabinets that must be sold to breakeven.
3. If computer controlled machines are purchase to make parts variable cost will decrease by 9% but common fixed will increase by$44,000. Commute the effect on operating income also calculate new break even point. Machines purchases at beginning of 6th month. Fixed cost incurred uniformaly.
4. Use original data. AWI is adding a retail outlet. This increase fixed cost by $70,000 per year.This change sales mix to 1:1. Retail outlet sales expected to increase by 30%..assumed opened at beginning of 6th month. Calculate the effect on expected profits for the current year, calculate new break-even point. Fixed cost are incurred uniformly.