Managerial Accounting 1B Ch18

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Managerial Accounting 1B

Financial and Managerial Accounting

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Chapter 18

1.Exercise 18-5 Predicting sales and variable costs using contribution margin L.O. C2

Orlando Company management predicts that it will incur fixed costs of $250,000 and earn pretax income of $350,000 in the next period. Its expected contribution margin ratio is 60%.

Required:

1.

Compute the amount of total dollar sales.(Omit the “$” sign in your response.)

Total dollar sales

2.

Compute the amount of total variable costs.(Omit the “$” sign in your response.)

Total variable costs

rev: 03-04-11

2.

Exercise 18-10 Contribution margin, break-even, and CVP chart L.O. P2

Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $630,000.

(a)

Compute the company’s contribution margin.(Omit the “$” sign in your response.)

Contribution margin

(b)

Compute the company’s contribution margin ratio.(Omit the “%” sign in your response.)

Contribution margin ratio

(c)

Compute the company’s break-even point in units.

Break-even point

(d)

Compute the company’s break-even point in dollars of sales.(Omit the “$” sign in your response.)

Break-even point

3.

Exercise 18-12 Income reporting and break-even analysis L.O. C2

Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $630,000.

(1)

Prepare a contribution margin income statement for Apollo Company at the break-even point.(Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.)

(2)

Assume if the company’s fixed costs increase by $135,000, what amount of sales (in dollars) is needed to break even point?(Omit the “$” sign in your response. )

Break-even

4.

Exercise 18-13 Computing sales to achieve target income L.O. C2

Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company targets an annual after-tax income of $840,000. The company is subject to a 20% income tax rate. Assume that fixed costs remain at $630,000.

(1)

Compute the unit sales to earn the target after-tax net income.

Unit sales

(2)

Compute the dollar sales to earn the target after-tax net income.(Omit the “$” sign in your response.)

Dollar sales

5. Exercise 18-15 Predicting unit and dollar sales L.O. C2
Greenspan Company management predicts $500,000 of variable costs, $800,000 of fixed costs, and a pretax income of $100,000 in the next period. Management also predicts that the contribution margin per unit will be $60.

(1)

Compute the total expected dollar sales for next period.(Omit the “$” sign in your response.)

Total expected dollar sales

(2)

Compute the number of units expected to be sold next period.

Expected unit sales

6.

Exercise 18-17 CVP analysis using composite units L.O. P4

Home Builders sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $100 and of each door is $250. The variable cost of a window is $62.50 and of a door is $175. Fixed costs are $450,000.

(1)

Determine the selling price per composite unit.(Omit the “$” sign in your response.)

Selling price per composite unit

(2)

Determine the variable costs per composite unit.(Omit the “$” sign in your response.)

Variable costs per composite unit

(3)

Determine the break-even point in composite units.

Break-even point

composite units

(4)

Determine the number of units of each product that will be sold at the break-even point.

Unit sales of windows at break-even point

Unit sales of doors at break-even point

rev: 03-04-11

7.

Problem 18-1A Contribution margin income statement and contribution margin ratio L.O. A1

The following costs result from the production and sale of 4,000 drum sets manufactured by Vince Drum Company for the year ended December 31, 2011. The drum sets sell for $250 each. The company has a 25% income tax rate.

Required:

1.

Prepare a contribution margin income statement for the company.(Input all amounts as positive values. Omit the “$” sign in your response.)

2.1

Compute its contribution margin per unit.(Input all amounts as positive values. Omit the “$” sign in your response.)

2.2

Compute its contribution margin ratio.(Omit the “%” sign in your response.)

Contribution margin ratio

8.

Problem 18-7A Break-even analysis with composite units L.O. P4

National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $55; white, $85; and blue, $110. The per unit variable costs to manufacture and sell these products are red, $40; white, $60; and blue, $80. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $150,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $10; white, by $20; and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $20,000.

Required:

1.

Assume if the company continues to use the old material, determine its break-even point in both sales units and sales dollars of each individual product.(Always round your composite units up (ceiling rounding) to next whole unit. Then use the Sales Units to calculate Sales Dollars. Omit the “$” sign in your response.)

Break-Even Points

Sales Units

Sales Dollars

Red at break-even

White at break-even

Blue at break-even

2.

Assume if the company uses the new material, determine its new break-even point in both sales units and sales dollars of each individual product.(Always round your composite units up (ceiling rounding) to next whole unit. Then use the Sales Units to calculate Sales Dollars. Omit the “$” sign in your response.)

Break-Even Points

Sales Units

Sales Dollars

Red at break-even

White at break-even

Blue at break-even

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