Maurice Tutor

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    Argosy University/ Phoniex University/
    Nov-2005 - Oct-2011

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    Phoniex University
    Oct-2001 - Nov-2016

Category > Accounting Posted 24 Aug 2017 My Price 12.00

Gosnell Company

Gosnell Company produces two products: squares and circles. The projected income for the coming year, segmented by product line, follows:

 

                          Text Box: Squares Circles Total Sales $300,000 $2,500,000 $2,800,000 Less: Variable expenses 100,000 500,000 600,000 Contribution margin $200,000 $2,000,000 $2,200,000 Less: Direct fixed expenses 28,000 1,500,000 1,528,000 Product margin $172,000 $ 500,000 $ 672,000 Less: Common fixed expenses 100,000 Operating income $ 572,000

The selling prices are $30 for squares and $50 for circles.

 

Required

1.    Compute the number of units of each product that must be sold for Gosnell Company to break even.

2.    Compute the revenue that must be earned to produce an operating income of 10 percent of sales revenues.

3.    Assume that the marketing manager changes the sales mix of the two products so that the ratio is three squares to five circles. Repeat Requirements 1 and 2.

4.    Refer to the original data. Suppose that Gosnell can increase the sales of squares with increased advertising. The extra advertising would cost an additional $45,000, and some of the potential purchasers of circles would switch to squares. In total, sales of squares would increase by 15,000 units, and sales of circles would decrease by 5,000 units. Would Gosnell be better off with this strategy?

Answers

Maurice Tutor
(5)
Status NEW Posted 24 Aug 2017 10:08 PM My Price 12.00

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