Determine what Company Z's operating profit would have been if it had sold 2,100,000 units during the year, which is 100,000 more units than in the example shown in table. Assume that production output had remained the same at 2,500,000 units (the company's production output capacity).
| |
Company Y
|
Company Z
|
|
Operating Profit Report for Year
|
Per Unit
|
Totals
|
Per Unit
|
Totals
|
|
Sales volume, in Units
|
|
500,000
|
|
2,000,000
|
|
Sales Revenue
|
$85.00
|
$42,500,000
|
$25.00
|
$50,000,000
|
|
Cost of Goods Sold Expense (see below)
|
-56
|
-28,000,000
|
-18.45
|
-36,900,000
|
|
Gross Margin
|
$29.00
|
$14,500,000
|
$6.55
|
$13,100,000
|
|
Variable Operating Expenses
|
-12.5
|
-6,250,000
|
-2.5
|
-5,000,000
|
|
Contribution Margin
|
$16.50
|
$8,250,000
|
$4.05
|
$8,100,000
|
|
Fixed Operating Expenses
|
|
-5,000,000
|
|
-7,500,000
|
|
Operating Profit
|
|
$3,250,000
|
|
$600,000
|
|
Manufacturing Activity Summary for Year
|
Per Unit
|
Totals
|
Per Unit
|
Totals
|
|
Annual Production Capacity, in Units
|
|
800,000
|
|
2,500,000
|
|
Actual Output, in Units
|
|
500,000
|
|
2,500,000
|
|
Raw Materials
|
$15.00
|
$7,500,000
|
$7.50
|
$18,750,000
|
|
Direct Labor
|
20
|
10,000,000
|
2.75
|
6,875,000
|
|
Variable Manufacturing Overhead Costs
|
5
|
2,500,000
|
5
|
12,500,000
|
|
Total Variable Manufacturing Costs
|
$40.00
|
$20,000,000
|
$15.25
|
$38,125,000
|
|
Fixed Manufacturing Overhead Costs
|
16
|
8,000,000
|
3.2
|
8,000,000
|
|
Product Cost and Total Manufacturing Costs
|
$56.00
|
$28,000,000
|
$18.45
|
$46,125,00
|