Question 1: Bravo Company sells Widgets at $6 a unit. In FY 2016, fixed costs are expected to be $200,000 and variable costs are estimated to increase from $3 per unit to $4 a unit. Bravo wants to have a FY 2016 operating income of $40,000. Use this information to make an example of the number of units of Widgets that Bravo must sell in FY 2016 to meet this goal.
Question 2: During FY 2016, Bravo Company plans to sell Widgets for $5.00 a unit. Current variable costs are $3.00 a unit and fixed costs are expected to increase to a total of $100,000. Use this information to determine for FY 2016:
A) The number of units of Widgets for Bravo to breakeven.
B) The total dollar value of sales that Bravo must achieve to breakeven.
Question 3: For FY 2016 Bravo Company's CVP format Income Statement is as follows:
Bravo Company Income Statement (CVP format) For the Year Ended 12/31/16
Sales (100 units) $10,000
Variable Costs:
Direct Labor $1,500
Direct Materials 1,400
Factory Overhead (variable) 1,000
Selling Expenses (variable) 600
Administrative Expenses (variable) 500
Total Variable Expenses 5,000
Contribution Margin $5,000
Fixed Costs:
Factory Overhead (fixed) $500
Selling Expenses (fixed) 1,000
Administrative Expenses (fixed) 1,000
Total Fixed Expenses 2,500
Net Income (aka Operating Income) $2,500
Bravo utilizes a JIT production system and there are no Raw Materials, Work-in-Process or Finished Goods inventories. Bravo Company expects that all costs will remain the same for FY 2017 with the exception of fixed factory overhead which is budgeted to increase by $1,700. Use this information to determine:
1. FY 2016 Cost of Goods Sold.
2. FY 2016 breakeven point in units.
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