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Week 3 Problem Set

# Week 3 Problem Set - JolynnWeeks 248 ANSWER Net sales...

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Week 3 Individual Assignment  Jolynn Weeks 2-48 ANSWER: 2006 2007 Net sales \$68,222 68,222.00 75,044.20 Costs of products sold (33,125.00) (36,437.50) Selling, general, and administrative expense (21,848.00) (21,848.00) Operating income 13,249.00 16,758.70 Percentage increase in operating Income = (\$16,758.70 - \$13,249) / \$13,249 = 26.49% ***Selling, general and administrative are considered fixed costs and do not vary based on the activity leve Therefore, as the sales increase for Procter and Gamble so does the cost of products sold. The operating income becomes higher than the percentage increase in sales due to the fixed costs.

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Week 3 Individual Assignment  Jolynn Weeks 2-61 ANSWERS: 1. Compute the budgeted profit at the expected volume of 600,000 units under both the old and the new production environments. Old New Sales \$1,860,000 \$1,860,000 Variable Cost 1,260,000 660,000 Gross Profit \$600,000 \$1,200,000 Fixed Cost 580,000 1,140,000 Budgeted Profit \$20,000 \$60,000 2. Compute the budgeted break-even point under both the old and the new production environments. Old New Fixed Cost 580,000 1,140,000 Gross Profit 600,000 1,200,000 Expected Volume 600,000 600,000 Breakeven Point 580,000 570,000 (in units) ***(Fixed Costs/Gross Profit)*Expected Volume 3. Discuss the effect on profits if volume falls to 500,000 units under both the old and the new produc environments.

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