Question

Required 1. Determine the dollar amount of DimLok's present annual fixed costs per year. 2. Determine the number of units that DimLok must sell to achieve both profit objectives. Be sure to consider all constraints in determining your answer 3. Without regard to your answer in requirement 2, assume that Donna decides to sell 44,000 units at $210 per unit and 42,100 units at $180 per unit. (a) Prepare a budgeted income statement (contribution format) for DimLok showing budgeted operating income. (b) Would this projected operating income meet the stated profit objectives?

Answer 1

Answer Page No 0 Demkok's present annual tested events porn your 0 Dollar amount of Dollar amount of Dimhor's present annual fixed costs Dollar value of profit tangel 4. ordkurn on investment in annual fired - $40,000 2014 - $ 4200,000 1: Dollar amount of Dim Lok's present annual fixed costs - $4200,000 @ $o. of total events needed to achieve both the profit objectives : Courient manubackering facility capacily - 44000 units $1040,000 in additional fixed change for produción upto secounts A sales discount per enits for sales beyond uyeco units = 210-180 -$30 A variable cost of $30 per unit of abber the production - 64000 units

Page, wo @ No. of units = fixed costs + desised profit Contribution margir per unit :4 200,000 + 840,000 $210 - (100+30) 5040000 63000 units 2 80 Current capacity level will not be able to meet the projets objectives as 63000 units exceed the plant capacity of 44000 onits. . The cerent. Capacity is not sufficient to meet the profit objectives *Therebore, Dimbok will have to incore ase plant capacity Giresulting in an additional fixed charge of $1040,000 Increase in profit' target based on fixed corf = (4200,000 + 1040,000) X20% = 5240,000 X 20% $2048000 . : x200

Page No ③ Contribution onits gange of 44000 to 64000 units Contribution margir per unit = 180 - [160+30) = 180-130: = $50 No. of units = 5240.000 + 1048000 . (80 44000) + $50x(x +44000) 6288000 3520,000 + 50% -- 2200,000 6288000 1320,000 + 50% => 1320,000 + 50% = 6288000 50x = 6288000 – 1320,000 x 49680007 99360 units 2 50 .: At level of 99360 units, the unit, conshaint g 64000erin is not met for unitá exceding 64000 units, the variable coof is I reduced by $30 :

- Page No 4 Variable coof per unit for coils in excess og 64000 coils, Contribution mango per unit a $180 - (#100 - 30+30) = $80 No. of units = 5240,000 +1048000 (480x44000) + $50X64000 - 44000) +.80(x-64000) 5240,000 +1048000 3520000 + 1000,000 +80% ~ 5120000 6288000 808 – 600,000 801 - 600,000 = 6288000 80% = 6288000 + 600,000 80% = 6888000 x = 6888000 - SE100 units 80 1. No.of.total units needed to achieve both the profit objectives < 86Icoumits

budached income talement @@ The budgeted produce alderent - Page No ③ Revenue = (44000 x $ 210) + ( 4 2100 $ 180) = 9240000 + 7548000 .P. 56100 –44.00 = $ 16,818,000 - = 40100 ) 14.86100-64000 Amount Variable : costs = ( 64000 x $100) +(22100 x$70), z 6400,000 + 1544000 ('22100 unilo $ 9944000 fixed costs = 4200,000 + 1040,000 - $5240,000 Particular Revenue $ 16,818,000 Variable costs $ 7944,000) Contribution : $ 8871000 fixed costs (5240,000) Operating income $363/000 9. Yes, the projected operating income meets the Stated profit objectives

Page No ① Total clesived profit = (aoy x fized cont) + Rrofit per unit x Hofal emits sold) = (204.5240,000) + $30 x [64000 4200) 1048000 + 2583000 = $ 3631000 Total. Operating income = $3631000