Question 2 Foreman Fork, Inc.’s income statement for 2005 on production and sales of 200 000 units is as follows: Revenu

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Question 2
Foreman Fork, Inc.’s income statement for 2005 on production and sales of 200 000 units is as follows:
Revenues R2 600 000
Cost of goods sold 1 600 000
Gross margin 1 000 000
Marketing & Distribution costs (1 150 000)
Operating income (loss) R (150 000)
Foreman’s fixed manufacturing costs are R500 000 and variable marketing and distribution costs are R4 per unit.
Foreman’s gross margin per unit is R5. Sam Hogan, Foreman’s president believes that if production and sales had been 230 000 units, the company would have covered the R1 150 000 of marketing and distribution costs and enabled Foreman to breakeven for the year.
Required:
2.1 Calculate Foreman’s operating income if production and sales equal 230 000 units.
2.2 Was Sam Hogan was right or wrong? Briefly explain.
2.3. Calculate the breakeven point for 2005 in units and in revenues