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Experience:  Post Graduate Diploma in Management (MBA)
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Allen Company sells flags with team logos. Allen has fixed

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Allen Company sells flags with team logos. Allen has fixed costs of \$588,000 per year plus variable costs of \$5.50 per flag. Each flag sells for \$12.50.

Prepare Allen Company’s contribution margin format income statement for the year ended December 31, 2011. Assume sales of 73,000 flags. Cost of goods sold is 60% of variable costs. Operating costs make up the rest of variable costs and all of the fixed costs.
The company is considering an expansion that will increase fixed costs by 20% and variable costs by \$0.60 per flag. Compute the new breakeven point in units and in dollars. Should Allen company undertake the expansion? Give your reason for why or why not.
Submitted: 5 years ago.
Category: Homework
Expert:  Linda_us replied 5 years ago.
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Linda :

Hi Customer

Customer :

hello

Linda :

Just to clarify so we have any other information for part 2 where we need to compute breakeven point.

Customer :

I have already done so the breakeven point is 84,000

Customer :

I'm sorry that is the not the break even point for part 2

Customer :

it it the break even point for the information given at the beggining

Linda :

The reason I was asking was if we are increasing Fixed cost as well as variable cost the breakeven point would increase hence it won't be advisable for company to increase production.

Linda :

Please recheck if both fixed cost as well as variable cost is increasing or if its given one of them is decreasing it would make more sense

Customer :

i did it says they are both increasing

Linda :

its ok then I will solve it as given both increasing

Linda :

If you like my work In future you can request me by writing "FOR LINDA" in front of your post.

Please note that I get credit for my work only when you click accept.

Regards

Linda

Customer: replied 5 years ago.

Expert:  Linda_us replied 5 years ago.

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Linda_us, Finance, Accounts & Homework Tutor
Category: Homework
Satisfied Customers: 7290
Experience: Post Graduate Diploma in Management (MBA)

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