Acc543 Managerial Accounting: E19-24A Green Shades Inc. (GSI) sells hammocks; variable costs

Acc543 Managerial Accounting
E19-24A Assessing simultaneous changes in CVP relationships (a-c)
Green Shades Inc. (GSI) sells hammocks; variable costs are $75 each, and the hammocks are sold for $125 each. GSI incurs $250,000 of fixed operating expenses annually.Required
a. Determine the sales volume in units and dollars required to attain a $50,000 profit. Verify your answer by preparing an income statement using the contribution margin format.
b. GSI is considering implementing a quality improvement program. The program will require a $10 increase in the variable cost per unit. To inform its customers of the quality improvements, the company plans to spend an additional $20,000 for advertising. Assuming that the improvement program will increase sales to a level that is 3,000 units above the amount computed in Requirement a, should GSI proceed with plans to improve product quality? Support your answer by preparing a budgeted income statement.
c. Determine the new break-even point in units and sales dollars as well as the margin of safety percentage, assuming that the quality improvement program is implemented.
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