Crunchy Cones

Submitted By ameyapatkar
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(1) What amount of net income did the company report for the quarter? Explain why net income increased over the quarter.

The company reported Net Income of \$100,882 for the quarter. It rose due to the fact: 1. Decrease in fixed costs. 2. Increase in sales.

(2) What net income will be reported for the quarter if the company increases its sales price from \$2.50 to \$2.75? What sales price will generate the largest net income for the quarter, and at that price, how many units will be sold? (Hint: Use the trial-and-error method, inputting different sales prices to find the sales price that maximizes net income.) 1. Largest Net income will be generated when the selling price is \$3.36. At the selling price of \$3.36, the revenue generated is \$102,926. The quantity sold at this price is 131,094.10 units. 2. Net Income generated at a selling price of \$2.50 is \$86,307. 3. Net Income generated at a selling price of \$2.75 is \$95,994.

(3) Assuming a \$2.50 price, what income will be reported for the quarter if the company uses an 8-year life instead of a 4-year life for purposes of depreciating its property, plant and equipment? How would this change affect the company’s net cash from operations for the quarter? Explain.

1. The net Income generated at a selling price of \$2.50 and a four-year life (depreciation) is \$86,307. With a four-year life (depreciation), the net cash from operations at a selling price of \$ 2.50, is \$(184,213) 2. The net income generated at a selling price of \$2.50 and an eight-year life (depreciation) is \$88,897. With an eight-year life (depreciation), the net cash from operations at a selling price of \$ 2.50, is \$(185,323)

The total accumulated depreciation with four-year life is \$7,400
The total accumulated depreciation with an eight-year life is \$3,700
The difference between these is \$3,700. And the...

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