Barnes Corporation manufactures skateboards and is in the process of preparing next year’s budget. The pro forma income statement for the current year is presented below.
|
Sales (100 units at $100 a unit) |
|
$1,500,000 |
|
Cost of goods sold: |
|
|
|
Direct labor (variable) |
$250,000 |
|
|
Direct materials |
150,000 |
|
|
Variable factory overhead |
75,000 |
|
|
Fixed factory overhead |
100,000 |
575,000 |
|
Gross margin |
|
925,000 |
|
Selling expenses: |
|
|
|
Variable |
200,000 |
|
|
Fixed |
250,000 |
450,000 |
|
Net operating income |
|
$ 475,000 |
For the coming year, the management of Barnes Corporation anticipates a 10 percent increase in sales, a 12 percent increase in variable costs, and a $45,000 increase in fixed expenses.
The break even point for next year would be
A. $729,027.
B. $862,103.
C. $214,018.
D. $474,000.
E. $700,000.