1.Mauro Products sells a woven basket for $26 per unit. Its variable expense is $19 per unit and the company’s monthly fixed expense is $21,000.
Required:
If the company’s fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?Note: Do not round intermediate calculations.
Calculate the company’s break-even point in unit sales.
Calculate the company’s break-even point in dollar sales.Note: Do not round intermediate calculations.
2.Whirly Corporation’s contribution format income statement for the most recent month is shown below:
| Total | Per Unit | |
|---|---|---|
| Sales (7,800 units) | $ 249,600 | $ 32.00 |
| Variable expenses | 148,200 | 19.00 |
| Contribution margin | 101,400 | $ 13.00 |
| Fixed expenses | 55,000 | |
| Net operating income | $ 46,400 |
Required:
(Consider each case independently):
What would be the revised net operating income per month if the sales volume is 6,800 units?
What would be the revised net operating income per month if the sales volume increases by 30 units?
What would be the revised net operating income per month if the sales volume decreases by 30 units?
3.Required information
[The following information applies to the questions displayed below.]
Karlik Enterprises distributes a single product whose selling price is $28 per unit and whose variable expense is $18 per unit. The company’s monthly fixed expense is $24,000.
2. Calculate the company’s break-even point in unit sales.
4.Miller Company’s contribution format income statement for the most recent month is shown below:
| Total | Per Unit | |
|---|---|---|
| Sales (27,000 units) | $ 162,000 | $ 6.00 |
| Variable expenses | 97,200 | 3.60 |
| Contribution margin | 64,800 | $ 2.40 |
| Fixed expenses | 37,800 | |
| Net operating income | $ 27,000 |
Required:
(Consider each of the four requirements independently):
What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 15%?
Assume the sales volume increases by 4,590 units:
What is the revised net operating income?
What is the percent increase in unit sales?
Using the most recent month’s degree of operating leverage, what is the percent increase in net operating income?
What is the revised net operating income if the selling price decreases by $1.10 per unit and the number of units sold increases by 23%?
What is the revised net operating income if the selling price increases by $1.10 per unit, fixed expenses increase by $10,000, and the number of units sold decreases by 7%?
5.Engberg Company installs lawn sod in home yards. The company’s most recent monthly contribution format income statement follows:
| Amount | Percent of Sales | |
|---|---|---|
| Sales | $ 94,000 | 100% |
| Variable expenses | 37,600 | 40% |
| Contribution margin | 56,400 | 60% |
| Fixed expenses | 44,180 | |
| Net operating income | $ 12,220 |
Required:
Construct a new contribution format income statement for the company assuming a 8% increase in unit sales.
What is the company’s degree of operating leverage?
Using the degree of operating leverage, estimate the impact on net operating income of a 8% increase in unit sales.
6.Required information
[The following information applies to the questions displayed below.]
Jaffre Enterprises distributes a single product whose selling price is $16 per unit and whose variable expense is $13 per unit. The company’s fixed expense is $10,500 per month.
2. Calculate the company’s break-even point in unit sales.
7.Olongapo Sports Corporation distributes two premium golf balls—Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow:
| Product | Total | ||
|---|---|---|---|
| Flight Dynamic | Sure Shot | ||
| Sales | $ 690,000 | $ 310,000 | $ 1,000,000 |
| CM ratio | 60% | 75% | ?question mark |
Fixed expenses total $559,000 per month.
Required:
If sales increase by $54,000 a month, by how much would monthly net operating income increase?
Prepare a contribution format income statement for the company as a whole.
What is the company’s break-even point in dollar sales based on the current sales mix?
8.Wingate Company, a wholesale distributor of electronic equipment, has been experiencing losses as shown by its most recent monthly contribution format income statement:
| Sales | $ 1,628,000 |
|---|---|
| Variable expenses | 664,680 |
| Contribution margin | 963,320 |
| Fixed expenses | 1,060,000 |
| Net operating income (loss) | $ (96,680) |
In an effort to resolve the problem, the company wants to prepare an income statement segmented by division. Accordingly, the Accounting Department provided the following information:
| Division | |||
|---|---|---|---|
| East | Central | West | |
| Sales | $ 448,000 | $ 610,000 | $ 570,000 |
| Variable expenses as a percentage of sales | 46% | 35% | 43% |
| Traceable fixed expenses | $ 282,000 | $ 331,000 | $ 203,000 |
Required:
2-b. Would you recommend the increased advertising?
1. Prepare a contribution format income statement segmented by divisions.
2-a. The Marketing Department believes increasing the West Division’s monthly advertising by $25,000 will increase that division’s sales by 11%. Assuming these estimates are accurate, how much would the company’s net operating income increase (decrease) if the proposal is implemented?
9.Whitman Company has just completed its first year of operations. The company’s absorption costing income statement for the year follows:
| Whitman Company Income Statement | |
| Sales (41,000 units × $40.60 per unit) | $ 1,664,600 |
|---|---|
| Cost of goods sold (41,000 units × $21 per unit) | 861,000 |
| Gross margin | 803,600 |
| Selling and administrative expenses | 471,500 |
| Net operating income | $ 332,100 |
The company’s selling and administrative expenses consist of $307,500 per year in fixed expenses and $4 per unit sold in variable expenses. The $21 unit product cost given above is computed as follows:
| Direct materials | $ 10 |
|---|---|
| Direct labor | 4 |
| Variable manufacturing overhead | 3 |
| Fixed manufacturing overhead ($208,000 ÷ 52,000 units) | 4 |
| Absorption costing unit product cost | $ 21 |
Required:
Reconcile any difference between the net operating income on your variable costing income statement and the net operating income on the absorption costing income statement above.
Redo the company’s income statement in the contribution format using variable costing.
10.Ida Company produces a handcrafted musical instrument called a gamelan that is similar to a xylophone. The gamelans are sold for $861. Selected data for the company’s operations last year follow:
| Units in beginning inventory | 0 |
|---|---|
| Units produced | 11,000 |
| Units sold | 9,000 |
| Units in ending inventory | 2,000 |
| Variable costs per unit: | |
| Direct materials | $ 170 |
| Direct labor | $ 430 |
| Variable manufacturing overhead | $ 59 |
| Variable selling and administrative | $ 21 |
| Fixed costs: | |
| Fixed manufacturing overhead | $ 790,000 |
| Fixed selling and administrative | $ 670,000 |
Required:
Assume the company uses variable costing. Compute the unit product cost for one gamelan.
Assume the company uses absorption costing. Compute the unit product cost for one gamelan.Note: Round your intermediate calculations and final answer to the nearest whole dollar amount.
11.Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:
| Variable costs per unit: | |
| Manufacturing: | |
| Direct materials | $ 28 |
|---|---|
| Direct labor | $ 11 |
| Variable manufacturing overhead | $ 4 |
| Variable selling and administrative | $ 3 |
| Fixed costs per year: | |
| Fixed manufacturing overhead | $ 400,000 |
| Fixed selling and administrative expenses | $ 50,000 |
During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $53 per unit.
Required:
Reconcile the difference between variable costing and absorption costing net operating income in Year 1 and Year 2.
Assume the company uses variable costing:
Compute the unit product cost for Year 1 and Year 2.
Prepare an income statement for Year 1 and Year 2.
Assume the company uses absorption costing:
Compute the unit product cost for Year 1 and Year 2.
Prepare an income statement for Year 1 and Year 2.
12.Piedmont Company segments its business into two regions—North and South. The company prepared the contribution format segmented income statement as shown:
| Total Company | North | South | |
|---|---|---|---|
| Sales | $ 525,000 | $ 350,000 | $ 175,000 |
| Variable expenses | 315,000 | 245,000 | 70,000 |
| Contribution margin | 210,000 | 105,000 | 105,000 |
| Traceable fixed expenses | 126,000 | 63,000 | 63,000 |
| Segment margin | 84,000 | $ 42,000 | $ 42,000 |
| Common fixed expenses | 52,000 | ||
| Net operating income | $ 32,000 |
Required:
- Compute the companywide break-even point in dollar sales.
- Compute the break-even point in dollar sales for the North region.
- Compute the break-even point in dollar sales for the South region.
Note: For all requirements, round your intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar.
