Annual sales volumeUnit selling priceVariable expense per unitContribution margin per unitVelcro101,000$1.65$ 1.25$0.40Metal202,000$1.50Total fixed expenses are $404,000 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped,$80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $244,000consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by goingout of business.$ 0.70$0.80The company's managers would like to compute the break-even point in dollar sales for the company as a whole, and the break-evenpoint in unit sales for each product. They are considering two methods for computing each product's break-even point in unit sales:Required 1Method number 1. Include each product's traceable fixed costs and an allocated share of the common fixed costs in the numerator ofeach break-even calculation. The common fixed costs would be allocated to the three products using sales dollars as the allocationbase.Method number 2: Only include each product's traceable fixed costs in the numerator of each break-even calculation.Required:1. Using data from the most recent period, prepare a contribution format segmented income statement.2. What is the company's overall break-even point in dollar sales?Required 2Nylon404,000$ 0.85$ 0.25$ 0.603a. Calculate the break-even point in unit sales for each product using method 1.3b. What will be the company's overall profit if it sells exactly the break-even quantity of each product?4a. Calculate the break-even point in unit sales for each product using method 2.4b. What will be the company's overall profit if it sells exactly the break-even quantity of each product?5. Which method should the company use to calculate each product's break-even point in unit sales?Complete this question by entering your answers in the tabs below.4a. Velcro's Break-even point in units4a. Metal's Break-even point in units4a. Nylon's Break-even point in units4b. Overall profit (loss)Required 3a Required 4aand 3band 4bRequired 54a. Calculate the break-even point in unit sales for each product using method 2.4b. What will be the company's overall profit if it sells exactly the break-even quantity of each product?

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Annual sales volume Unit selling price Variable expense per unit Contribution margin per unit Velcro 101,000 $ 1.65 $ 1.25 $ 0.40 Metal 202,000 $ 1.50 $ 0.70 $ 0.80 Nylon 404,000 $ 0.85 $ 0.25 $ 0.60 Total fixed expenses are $404,000 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $244,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business.

Annual sales volume Unit selling price Variable expense per unit Contribution margin per unit Velcro 101,000 $ 1.65 $ 1.25 $ 0.40 Metal 202,000 $ 1.50 $ 0.70 $ 0.80 Nylon 404,000 $ 0.85 $ 0.25 $ 0.60 Total fixed expenses are $404,000 per period. Of the total fixed expenses, $20,000 could be avoided if the Velcro product is dropped, $80,000 if the Metal product is dropped, and $60,000 if the Nylon product is dropped. The remaining fixed expenses of $244,000 consist of common fixed expenses such as administrative salaries and rent on the factory building that could be avoided only by going out of business.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 47E: Klamath Company produces a single product. The projected income statement for the coming year is as...

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Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
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