Calculate the net income of the two systems if sales and production are expected to average 184,000 units per year.

4 accounting calculations

Dillon, Jones, and Kline, Ltd. is studying the acquisition of two electrical component insertion systems for producing its sole product, the universal gizmo. Data relevant to the systems follow.

 

Model A:
     Variable costs, $8.00 per unit
     Annual fixed costs, $1,971,200

 

Model B:
     Variable costs, $6.40 per unit
     Annual fixed costs, $2,227,200

 

The selling price is $32 per unit for the universal gizmo, which is subject to a 5 percent sales commission. (In the following requirements, ignore income taxes.)

 

 

1. How many units must the company sell to break even if Model A is selected? (Do not round intermediate calculations.)
   
2-a. Calculate the net income of the two systems if sales and production are expected to average 184,000 units per year.
3. Assume Model B requires the purchase of additional equipment that is not reflected in the preceding figures. The equipment will cost $900,000 and will be depreciated over a five-year life by the straight-line method. How many units must the company sell to earn $1,912,800 of income if Model B is selected? As in requirement (2), sales and production are expected to average 184,000 units per year.

 

4. Ignoring the information presented in part
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