# Midlands Inc. had a bad year in 2019. For the first time in its history, it operated at a loss. The company’s income statement showed the following results from selling 75,000 units of product: net sales \$1,500,000; total costs and expenses \$1,780,200; and net loss \$280,200. Costs and expenses consisted of the following. Total Variable Fixed Cost of goods sold \$1,106,000 \$598,000 \$508,000 Selling expenses 522,200 95,000 427,200 Administrative expenses 152,000 57,000 95,000 \$1,780,200 \$750,000 \$1,030,200 Management is considering the following independent alternatives for 2020. 1. Increase unit selling price 25% with no change in costs and expenses. 2. Change the compensation of salespersons from fixed annual salaries totaling \$200,000 to total salaries of \$40,010 plus a 5% commission on net sales. 3. Purchase new high-tech factory machinery that will change the proportion between variable and fixed cost of goods sold to 50:50. (a) Compute the break-even point in dollars for 2019.

(a) the break-even point in dollars for 2019 = \$2,060,400.00

Explanation:

Break Even Point in Dollars = Fixed Cost/Contribution margin

Contribution margin = (Sales - Variable Cost) as a portion of sales.

Total variable cost in 2019 = \$598,000 + \$95,000 + \$57,000 = \$750,000

Total sales for 2019 = \$1,500,000

Contribution = \$1,500,000 - \$750,000 = \$750,000

As a portion of sales = \$750,000/\$1,500,000 = 50%

Total Fixed Cost = \$1,030,200

Therefore Break Even Point in Dollars for the year 2019 = \$1,030,200/50% = \$2,060,400

The break-even point in dollars for 2019 can be computed by finding the point at which the company's total costs and expenses equal its net sales. In this case, the break-even point is approximately \$2,179,255.

### Explanation:

The break-even point in dollars for 2019 can be computed by finding the point at which the company's total costs and expenses equal its net sales. In this case, the company operated at a loss, so the break-even point represents the level of sales needed to cover all costs and result in zero profit or loss. The break-even point can be calculated using the formula: Break-even point = Fixed costs / (Selling price per unit - Variable cost per unit)

Using the given information, the fixed costs are \$1,030,200 and the selling price per unit is \$1,500,000 / 75,000 units = \$20. The variable cost per unit is (\$1,106,000 - \$508,000) / 75,000 units = \$10.43. Substituting these values into the formula, we get: Break-even point = \$1,030,200 / (\$20 - \$10.43) ≈ 108,962.75 units.

To calculate the break-even point in dollars, we multiply the break-even point in units by the selling price per unit: Break-even point in dollars = 108,962.75 units * \$20 ≈ \$2,179,255.

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## Related Questions

A \$6,000, 60-day, 12% note recorded on November 21 is not paid by the maker at maturity. The journal entry to recognize this event is A. debit Cash, \$6,120 credit Notes Receivable, \$6,120B. debit Accounts Receivable, \$6,120 credit Notes Receivable, \$6,000 Credit Interest Receivable, \$120C. debit Notes Receivable, \$6,060 credit Accounts Receivable, \$6,060D. debit Accounts Receivable, \$6,120 credit Notes Receivable, \$6,000Credit Interest Revenue, \$120

Option (B) is correct.

Explanation:

On November 21,

Note amount = \$6,000

Period = 60-day

Interest rate = 12%

When Note is not paid by the market at maturity, then

The Accounts Receivable Account is debited with the Par Value of Note plus interest income and credited Notes Receivables \$6,000 and Credit Interest Revenue \$120.

Therefore, the journal entry is as follows:

Accounts Receivable A/c     Dr. \$6,120

To Notes Receivables                              \$6,000

To Interest Revenue                                 \$120

(To record the note)

The journal entry to recognize a note not being paid at maturity is to debit Cash and credit Notes Receivable for the principal balance and to credit Interest Revenue for the accrued interest.

### Explanation:

The correct journal entry to recognize the event of a \$6,000, 60-day, 12% note not being paid by the maker at maturity is: A. debit Cash, \$6,120
credit Notes Receivable, \$6,12

This entry debits the Cash account to account for the amount the maker owes and credits the Notes Receivable account to remove the note from the books. The additional \$120 represents the accrued interest, which is recognized as Revenue.

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An investment offers to double your money in 30 months (don’t believe it). What rate per six months are you being offered? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)

The rate of change in 6 months is 14.87%

Explanation:

Let a be the amount that the money is multiplied in one month. We know that in 30 months it is multiplied by 2, so if we power a by 30 wew obtain 2:

a³⁰ = 2

Thus, 2 = a³⁰ = a⁶*⁵ = (a⁶)⁵

(here we use the propiety a^bc = (a^b)^c = (a^c)^b)

We can conclude that a⁶ = 2^(1/5) = 1.1487

The rate in 6 months is (1.1487-1)*100 = 14.87%

14.86% every 6 months

Explanation:

Let the original amount be a

An investment offers to double your money in 30 months i.e. 2a in 30 months

Fv = Pv (1 + x)ⁿ

Fv future value (i.e. future value of the cash flow after a particular time period. )

Pv Present value

x interest

n number of compounding period

Fv = Pv (1 + x)ⁿ

2a = a (1 + x)^(30/6)

2^(1/5)= 1 + x

1.1486 = 1 + x

x = 0.1486 0r 14.86%

The following income statement is provided for Vargas, Inc. Sales revenue (2,500 units × \$60 per unit) \$ 150,000 Cost of goods sold (variable; 2,500 units × \$20 per unit) (50,000 ) Cost of goods sold (fixed) (8,000 ) Gross margin 92,000 Administrative salaries (42,000 ) Depreciation (10,000 ) Supplies (2,500 units × \$4 per unit) (10,000 ) Net income \$ 30,000 What is this company's magnitude of operating leverage?

Explanation:

According to the scenario, the computation of the given data are as follows:

Variable cost = Cost of goods sold (variable) + Supplies

= \$50,000 + \$10,000 = \$60,000

Fixed cost = Cost of goods sold (fixed) + Administrative salaries + Depreciation

= \$8,000 + \$42,000 +\$10,000 = \$60,000

So, we can calculate the operating leverage by using following formula:

Operating leverage = Contribution margin ÷ Net operating income

Where, Contribution Margin = Sales revenue - Variable cost

= \$150,000 - \$60,000 = \$90,000

And Net operating income = Contribution Margin - Fixed Cost

= \$90,000 - \$60,000 = \$30,000

By putting the value, we get

Operating leverage = \$90,000 ÷ \$30,000

= 3

Andrews Company manufactures a line of office chairs. Each chair takes \$14 of direct materials and uses 1.9 direct labor hours at \$16 per direct labor hour. The variable overhead rate is \$1.20 per direct labor hour, and the fixed overhead rate is \$1.60 per direct labor hour. Andrews expects to have 675 chairs in ending inventory. There is no beginning inventory of office chairs. unit product cost. budgeted ending inventory

Chair unit cost:                 \$    49.72

Total cost for 675 chairs: \$  33,561

Explanation:

Direct Materials:                                                                   \$  14.00

Direct Labor:   1.9 hours x \$16 labor cost:                           \$ 30.40

1.9 labor hours x (\$ 1.6 variable rate + \$ 1.20 fixed rate) = \$  5.32

Total unit cost:                             \$ 49.72

Cost to produce 675 chairs:

675 charis x \$ 49.72 per chair = \$ 33,561‬

Effie Company uses a periodic inventory system. Details for the inventory account for the month of January, 2018 are as follows: Units Per unit price Total Balance, 1/1/18 200 \$5.00 \$1,000 Purchase, 1/15/18 100 5.30 530 Purchase, 1/28/18 100 5.50 550 An end of the month (1/31/18) inventory showed that 160 units were on hand. If the company uses FIFO and sells the units for \$10 each, what is the gross profit for the month

the gross profit for the month is \$1,180

Explanation:

FIFO Inventory System Sell the Older Inventory Acquired first followed by the Recent Acquired Inventory

Sales (240 units × \$10.00)                          \$2,400

Less Cost of Sales :

200 units × \$5.00 :                 \$1,000

40 units × \$5.50    :                 \$  220

Total Cost of Sales                                     ( \$1,220)

Gross Profit                                                    \$1,180

Read the following descriptions and identify the type of risk or term being described:a. This type of risk relates to fluctuations in exchange rates.
b. This type of risk is inherent in a firmâs operations. A standard measure of the risk per unit of return. This can be used to reduce the stand-alone risk of an investment by combining it with other investments in a portfolio.
c. A standard measure of the risk per unit of return
d. This type of risk relates to fluctuations in exchange rates