Belli-Pitt,Inc Produces a Single Product

Belli-Pitt,Inc produces a single product.The results of the company's operations for a typical month are summarized in contribution format as follows:

Required:

a) Given the present situation, compute

1 The break-even sales in kilograms.
2 The break-even sales in dollars.
3 The sales in kilograms that would be required to produce operating income of $90,000.
4 The margin of safety in dollars.

b) An important part of processing is performed by a machine that is currently being leased for $20,000 per month. Belli-Pitt has been offered an arrangement whereby it would pay $0.10 royalty per kilogram processed by the machine rather than the monthly lease.

1 Should the company choose the lease or the royalty plan?
2 Under the royalty plan, compute the break-even point in kilograms.
3 Under the royalty plan, compute the break-even point in dollars.
4 Under the royalty plan, determine the sales in kilograms that would be required to produce operating income of $90,000.