Artistic Woodcrafting Inc. cabinet shop. The offer two grades of cabinet Grade I and Grade II
Last year $850,000 sales volume, First 6 months this year $600,000 and sales expected to be $1.6 billion for the entire year.
The average unit selling prices, unit, variable costs, and direct cost are as follows:
Grade I Unit Price 3,400 Unit variable cost 2,686 Direct fixed cost 95,000
Grade II Unit Price 1,600 Unit variable cost 1,323 Direct fixed cost 95,000
Common fixed cost (fixed cost not traceable to either cabinet) are $35,000
Currently for every 3 Grade I sold, 7 Grade II are sold.
1. Calculate the number of Grade 1 and Grade II cabinets expected to be sold during current year.
2. Calculate the number of Grade I and Grade II cabinets that must be sold to breakeven.
3. If computer controlled machines are purchase to make parts variable cost will decrease by 9%
but common fixed will increase by $44,000. Commute the effect on operating income also calculate
new break even point. Machines purchases at beginning of 6th month. Fixed cost incurred uniformaly.
4. Use original data. AWI is adding a retail outlet. This increase fixed cost by $70,000 per year.This change
sales mix to 1:1. Retail outlet sales expected to increase by 30%..assumed opened at beginning of
6th month. Calculate the effect on expected profits for the current year, calculate new break even point.
Fixed cost are incurred uniformly.