# 2024 – Dillon Jones and Kline Ltd is studying the acquisition of two electrical

2024 – Dillon Jones and Kline Ltd is studying the acquisition of two electrical.

4 accounting calculations – 2024

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

## >model

Model A:

Variable costs, \$8.00 per unit

## >     annual fixed costs

Annual fixed costs, \$1,971,200

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

## 5 percent sales commission

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

1.

## Round intermediate calculations

How many units must the company sell to break even if Model A is selected? (Do not round intermediate calculations.)

2-a.

## Net income

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

4.

Ignoring the information presented in part (3), at what volume level will the annual total cost of each system be equal?

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