Assume that Company Z’s production output for the year is 2,000,000 units. In other words, assume that the business manufactures the same number of units that it sells in the year. Assume all other manufacturing and operating factors are the same. Determine the company’s operating profit for the year.
|
Company Y |
Company Z |
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|
Operating Profit Report for Year |
Per Unit |
Totals |
Per Unit |
Totals |
|
Sales volume, in Units |
500,000 |
2,000,000 |
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|
Sales Revenue |
$85.00 |
$42,500,000 |
$25.00 |
$50,000,000 |
|
Cost of Goods Sold Expense (see below) |
-56 |
-28,000,000 |
-18.45 |
-36,900,000 |
|
Gross Margin |
$29.00 |
$14,500,000 |
$6.55 |
$13,100,000 |
|
Variable Operating Expenses |
-12.5 |
-6,250,000 |
-2.5 |
-5,000,000 |
|
Contribution Margin |
$16.50 |
$8,250,000 |
$4.05 |
$8,100,000 |
|
Fixed Operating Expenses |
-5,000,000 |
-7,500,000 |
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|
Operating Profit |
$3,250,000 |
$600,000 |
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|
Manufacturing Activity Summary for Year |
Per Unit |
Totals |
Per Unit |
Totals |
|
Annual Production Capacity, in Units |
800,000 |
2,500,000 |
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|
Actual Output, in Units |
500,000 |
2,500,000 |
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|
Raw Materials |
$15.00 |
$7,500,000 |
$7.50 |
$18,750,000 |
|
Direct Labor |
20 |
10,000,000 |
2.75 |
6,875,000 |
|
Variable Manufacturing Overhead Costs |
5 |
2,500,000 |
5 |
12,500,000 |
|
Total Variable Manufacturing Costs |
$40.00 |
$20,000,000 |
$15.25 |
$38,125,000 |
|
Fixed Manufacturing Overhead Costs |
16 |
8,000,000 |
3.2 |
8,000,000 |
|
Product Cost and Total Manufacturing Costs |
$56.00 |
$28,000,000 |
$18.45 |
$46,125,000 |