Question

The condensed income statement for the Blossom and Paul partnership for 2020 is as follows. Blossom and Paul Company Income Statement For the Year Ended December 31, 2020 Sales (250,000 units) $1,250,000 Cost of goods sold 900,000 Gross profit 350,000 Operating expenses Selling $250,000 Administrative 112,500 362,500 Wet loss $(12,500) cost behavior analysis indicates that 75% of the cost of goods sold are variable, 42% of the selling expenses are variable, and 40% of the administrative expenses are variable. Your answer is correct. Compute the break-even point in total sales dollars for 2020. (Round intermediate calculations to 2 decimal places, e.g. 15.25 and final answers to O decimal places, e.g. 2,520.) Break-even point in dollars T 1286765 LINK TO TEXT Your answer is correct. Blossom has proposed a plan to get the partnership out of the red and improve its profitability. She feels that the quality of the product could be substantially improved by spending $0.25 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive Dressures. Blossom estimates that sales volume will increase by 25%. Compute the net income under Blossom's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to O decimal places, e.g. 2,520.) Amount Net income 93750 Break-even point | 1351101 LINK TO TEXT x Your answer is incorrect. Try again. Paul was a marketing major in college. He believes that sales volume can be increased only by intensive advertising and promotional campaigns. He therefore proposed the following plan as an alternative to Blossom's: (1) increase variable selling expenses to $0.59 per unit, (2) lower the selling price per unit by 0.25, and (3) increase fixed selling expenses by $40,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Paul's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to o decimal places, e.g. 2,520.) Amount Net income -70500 Break-even point 2161619

Answer 1

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Blossom and Paul
	Total cost	Variable amount	Variable cost Per unit	Fixed Cost	Remarks
Number of units	250,000.00
Sales	1,250,000.00		5.00
Cost of goods sold	900,000.00	675,000.00	2.70	225,000.00	Variable amount is 75% of total cost. Variable cost Per unit is $ 675,000/ number of units i.e. 250,000. Fixed cost is 25% of total cost.
Selling Expenses	250,000.00	105,000.00	0.42	145,000.00	Variable amount is 42% of total cost. Variable cost Per unit is $ 105,000/ number of units i.e. 250,000. Fixed cost is 58% of total cost.
Admin Expenses	112,500.00	45,000.00	0.18	67,500.00	Variable amount is 40% of total cost. Variable cost Per unit is $ 45,000/ number of units i.e. 250,000. Fixed cost is 60% of total cost.
Answer 3	Amount $	Note
Sell price	5.00	A
Reduction by	0.25	B
Revised sell price	4.75	C=A-B
Sales units	250,000.00	D
Increase by	60%	E
Increase by	150,000.00	F=D*E
Revised sales units	400,000.00	G=F+D
Fixed Selling Expenses	145,000.00	H
Increase by	40,000.00	I
Revised Fixed Selling Expenses	185,000.00	J=H+I
Income statement	Amount $
Sell price	4.75	See C
Less: Variable costs
Cost of goods sold	2.70
Selling Expenses	0.59
Admin Expenses	0.18
Total Variable costs	3.47	K
Contribution per unit	1.28	L=C-K
Units sold	400,000.00	See G
Total Contribution	512,000.00	M=G*L
Less: Fixed costs
Cost of goods sold	225,000.00
Selling Expenses	185,000.00	See J
Admin Expenses	67,500.00
Total Fixed costs	477,500.00	N
Net Income	34,500.00	O=M-N
Breakeven units	373,047.00	P=N/L