question archive The condensed income statement for the Blossom and Paul partnership for 2020 is as follows
The condensed income statement for the Blossom and Paul partnership for 2020 is as follows
Subject:AccountingPrice: Bought3
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 (240,000 units)$1,200,000Cost of goods sold800,000Gross profit400,000Operating expensesSelling$280,000Administrative156,000436,000Net loss$(36,000)
A 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.
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 0 decimal places, e.g. 2,520.)
Break-even point in dollars$:
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 $0.30 more per unit on better raw materials. The selling price per unit could be increased to only $5.25 because of competitive pressures. Blossom estimates that sales volume will increase by 25%. Compute the net income under Blossom's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)
Net income$:
Break-even point$:
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 $0.23, and (3) increase fixed selling expenses by $40,000. Paul quoted an old marketing research report that said that sales volume would increase by 60% if these changes were made. Compute the net income under Paul's proposal and the break-even point in dollars. (Round intermediate calculations to 4 decimal places, e.g. 15.2515 and final answers to 0 decimal places, e.g. 2,520.)
Net income$:
Break-even point$:
Which plan should be accepted?
