Question :
74) Gilley, Inc., sells a single product.
The company’s most recent : 1196228
74) Gilley, Inc., sells a single product.
The company’s most recent income statement is given below.
Sales (4,000 units) $120,000
Less variable expenses (68,000)
Contribution margin 52,000
Less fixed expenses (40,000)
Net income $
12,000
Required:
a.Contribution margin per unit is$ ________ per unit
b.If sales are doubled to $240,000,
total variable costs will equal$ ________
c.If sales are doubled to $240,000,
total fixed costs will equal$ ________
d.If 10 more units are sold, profits will increase by$ ________
e.Compute how many units must be sold to break even. # ________
f.Compute how many units must be sold
to achieve profits of $20,000.# ________
74)_____________
75) Widget Company sells widgets for $20.00 each. The manufacturing costs, all variable, are $6 each. The company is planning on renting an exhibition booth for both display and selling purposes at the annual candy convention. The company’s sales manager will earn a vacation bonus if she can earn a target net income of $150,000, for the sales operation at the convention.
The convention organizers provide the advertising and guarantee a certain level of traffic, in exchange for 15% of the net income.
Given the extra 15% surcharge, which operates like a tax on net income.
The company absorbs all of the fixed costs of production for the sales made at the convention.
How many widgets does the sales manager have to sell to earn the vacation bonus? 75)_____________
76) You have just been hired as the new management accountant for a pool chemical wholesaler.
The company sells packages of pool chemicals, consisting of all of the chemicals a typical pool would need for a week, to retail stores, for a price of $25, and a variable cost of $8.
The company has fixed costs of $125,000.
The previous accountant was promoted to an associated company but has left you her working papers for a project she was working on.
The project involves advising management whether to accept an advertising arrangement with an industry publication.
The arrangement being offered is a contract calling for a set payment per month (amount to be negotiated) for 6 months.
The industry is cyclical and has no sales for 4 months [16 weeks] of the year.
The previous accountant notes show her projection that this would result an increase of 50 units per week, above the normal 1,000 units per week that the company sells currently.
The increased demand would arise from more customers to existing outlets, and from new outlets as well.
The advertiser is suggesting a monthly fee of $1,800.
What is your advice, based on the previous accountant’s notes and your own analysis? 76)_____________
77) Seamless Gutter sells 10 metre sections of eaves trough for $12. The unit variable costs per section are $8.80. Fixed costs total $4,800.
Required:
a.What is the contribution margin per section?
b.What is the breakeven point in sections? . . . in dollars?
c.How many sections must be sold to earn a pretax income of $4,000?
d.What is the margin of safety assuming 1,800 sections are sold? 77)_____________
78) The Holiday Card Company, a producer of specialty cards, has asked you to complete several
calculations based upon the following information:
Income tax rate 30%
Selling price per unit$6.60
Variable cost per unit $5.28
Total fixed costs $46,200.00
Required:
a.What is the breakeven point in cards?
b.What sales volume is needed to earn an after-tax net income of $13,028.40?
c.How many cards must be sold to earn an after-tax net income of $18,480?
78)_____________
79) Auto Tires, Inc. sells tires to service stations for an average of $45 each. The variable costs of each tire are $30 and monthly fixed manufacturing costs total $15,000. Other monthly fixed costs of the company total $12,000.
Required:
a.What is the breakeven level in tires?
b.What is the margin of safety assuming sales total $90,000?
c.What is the breakeven level in tires assuming variable costs increase by 20 percent?
d.What is the breakeven level in tires assuming the selling price goes up by 10 percent, fixed manufacturing costs decline by 10 percent and other fixed costs decline by $150? 79)_____________
80) Karen’s Klothes sells blouses for women and girls. The average selling price and variable cost for each product are as follows:
Women: Selling Price $18.00 Girls: Selling Price $15.00
Variable Cost $12.75Variable Cost $10.50
Fixed costs are $30,000 and cannot be separated evenly between the two products.
Required:
a.What is the breakeven point in units for each type of blouse assuming the sales mix is 2:1 in favour of women’s blouses? Total sales cannot exceed 7,000 units due to space constraints.
b.What is the operating income assuming the sales mix is 2:1 in favour of women’s blouses, and sales total 9,900 blouses? 80)_____________
81) Popcorn, Inc. currently sells plain popcorn at the ballpark. During a typical month the stand reports a profit of $18,000 with sales of $100,000 and fixed costs of $42,000 and variable costs of $0.64 per box.
Next year the company plans to start selling candy-coated popcorn for $3 a box. The candy-coated popcorn will have a variable cost of $0.72. The new equipment and personnel to handle the popcorn will increase monthly fixed costs by $17,616. Initial sales of candy-coated popcorn should total 10,000 boxes. However, most of the candy-coated popcorn sales are anticipated to come from current plain popcorn purchasers. Consequently, monthly sales of plain popcorn will decline to $40,000.
After the first year of candy-coated popcorn sales, the company president believes that it will increase to 15,000 boxes a month and that plain popcorn sales will increase to $225,000 a month.
Required:
a.Determine the monthly breakeven sales in dollars before adding the candy-coated popcorn product.
b.Determine the monthly breakeven sales during the first year of candy-coated popcorn sales assuming a constant sales mix. 81)_____________
82) Heady Company sells headbands to retailers for $5. The variable cost of goods sold per headband is $1, with a selling commission of 10 percent. Fixed manufacturing costs total $25,000 per month, while fixed selling and administrative costs total $10,500. The income tax rate for Heady Company is 30 percent.
Required:
a.What is the breakeven point in headbands?
b.What are target sales in headbands to generate a before tax income of $3,000?
c.What are target sales in headbands to generate an after tax income of $3,080?
d.What is net income assuming Heady sells total 15,000 headbands? 82)_____________
83) Query Company sells pillows for $25.00 each.
The manufacturing cost, all variable, is $10 per pillow.The company is planning on renting an exhibition booth for both display and selling purposes at the
annual crafts and art convention.
The convention coordinator allows three options for each participating
company.
They are:
1.paying a fixed booth fee of $5,010, or
2.paying an $4,000 fee plus 10% of revenue made at the convention, or
3.paying 20% of revenue made at the convention.
Required:
a.Compute the breakeven sales in pillows of each option.
b.Which option should Query Company choose, assuming sales are expected to be 800 pillows?
83)_____________
84) Karen Hefner, a florist, operates retail stores in several shopping malls. The average selling price of an
arrangement is $30 and the average cost of each sale is $18.
A new mall is opening where Karen wants to
locate a store, but the location manager is not sure about the rent method to accept.
The mall operator
offers the following three options for its retail store rentals:
1.paying a fixed rent of $15,000 a month, or
2.paying a base rent of $9,000 plus 10% of revenue received, or
3.paying a base rent of $4,800 plus 20% of revenue received up to a maximum rent of $25,000.
Required:
a.For each option, compute the breakeven sales and the monthly rent paid at break-even.
b.Beginning at zero sales, show the sales levels at which each option is preferable up to 5,000 units.
84)_____________
85) ABC Grocery needs to know the kilograms of bananas to have on hand each day. Each kilogram of bananas costs $0.25 and can be sold for $0.40. Unsold bananas are worthless at the end of the day. The following demands were found after studying the last six month’s sales:
200 kilograms of bananas one-fourth of the time
300 kilograms of bananas one-half of the time
400 kilograms of bananas one-fourth of the time
Required:
Determine whether ABC Grocery should order 200, 300, or 400 kilograms of bananas. 85)_____________
86) Yurus Manufacturing Company produces two products, X and Y.
The following information is presented
for both products:
XY
Selling price per unit$36$24
Variable cost per unit 2812
Total fixed costs are $234,000.
Required:
a.Calculate the contribution margin for each product.
b.Calculate breakeven point in units of both X and Y if the sales mix is 3 units of X for every unit of Y.
c.Calculate breakeven volume in total dollars if the sales mix is 2 units of X for every 3 units of Y.
86)_____________
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