1)Denim Inc

Answer:

1. Net Income = Total Revenues - Total Expenses

Total Revenues = 700 printers x $320 = $224,000

Total Expenses = ($46.75x700) + $99,000 = $131,725

Net Income = $224,000 - $131,725

Net Income = $92,275

2. 
a. Break-even Volume = Total Fixed Cost / (Selling Price - Variable Cost per Unit)

Total Fixed Cost = $260,200

Selling Price = $7,400

Variable Cost per Unit = $1,950

Break-even Volume = $260,200 / ($7,400 - $1,950)

Break-even Volume = $260,200 / $5,450

Break-even Volume = 47.74 or 48 units

b. Break-even Revenue = Total Fixed Cost / (Contribution Margin) where CM = 1 - (Variable Cost per Unit / Selling Price)

Break-even Revenue = $260,200 / 1 - ($1,950 / $7,400)

Break-even Revenue = $353,299

c. Break-even as a Percent of Capacity per Annum  = Break-even Volume / Capacity per Annum

Break-even Volume = 47.74

Capacity per Annum = 59

Break-even as a Percent of Capacity per Annum =  (47.74 / 59) x 100%

Break-even as a Percent of Capacity per Annum = 80.92%

d. Total Revenue - Total Expenses

Total Revenue = $7,400 x 56 units = $414,400

Total Expenses = $260,200 + ($1,950 x 56  units) = $369,400

$414,400 - $369,400 = $45,000

Therefore, they made a profit of $45,000 if 56 machines are sold in a year.

Step-by-step explanation

• For number 1, we just have to compute for the Net Income in a week using the formula Total Revenue minus Total Expenses. For us to get the Total Revenue, we just have to multiply the Selling Price to the number of units sold so, we've got $224,400 by multiplying 700 units to $320. On the other hand for the Total Expenses, we just have to add all the costs that the company spend in producing the product from which we have a total fixed cost of $99,000 and variable cost per unit is $46.75 (total variable cost will be solve by multiplying the cost per unit to the total number of units, so we have 46.75 x 700). By subtracting the Total Expenses from the Total Revenue, we can get the Net Income for that particular week which is $92, 275.
• For number 2 letter a: to get the Break-even point in unit or the Break-even Volume, we just have to divide Total Fixed Cost and the difference between Selling Price and Variable Cost per unit. It is given that the Total Fixed Cost is $260,200; Selling Price is $7,400; and Variable Cost per Unit is $1,950, we can now use the formula to get the Break-even Volume. Take note that Breakeven Volume is the amount of your product that you will need to produce and sell to cover total costs of production in a particular period.
• For number 2 letter b: to get the Break-even Revenue, we just have to divide Total Fixed Cost and Contribution Margin wherein Contribution Margin is computed by 1 - (variable cost per unit / selling price). By using the formula and performing the operations on it, we've got a Break-even Revenue of $353,299. Take note that Break-even Revenue is the amount of money the business generates from the sale of the break-even Volume.
• For number 2 letter c: to compute for the percentage of Break-even Volume within the given Capacity on a specific period, we just have to divide Break-even Volume and the Capacity per Annum. Since we already computed for the Break-even Volume which is 47.74 and it is given that the capacity per annum is 59, we can get a Break-even as a Percentage of Capacity per Annum of 80.92%. Meaning, 80.92% of the capacity is included in the company's Break-even Volume.
• For number 2 letter d: in order for us to know if the company has a profit or loss, we just have to subtract Total Expenses from Total Revenue. If we got a positive answer, it means that a company has a profit, however if the result is negative, it is a loss. By subtracting the Total Expenses from the Total Revenue and it gave us an answer of positive $45,000 it means that a company has a profit of $45,000 if 56 units of machines are sold within that year.