2. What is the expected contribution margin ratio? Round to the nearest whole percent.3. Determine the break-even sales in units and dollars.UnitsunitsDollars4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?2$5. What is the expected margin of safety in dollars and as a percentage of sales?Dollars:Percentage: (Round to the nearest whole percent.)%6. Determine the operating leverage. Round to one decimal place. Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is thereforeassumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments duringthe year. A summary report of these estimates is as follows:EstimatedEstimated Variable CostFixed Cost(per unit sold)Production costs:Direct materials$22Direct labor14Factory overhead$414,00011Selling expenses:Sales salaries and commissions86,000Advertising29,100Travel6,500Miscellaneous selling expense7,1004Administrative expenses:Office and officers' salaries84,100Supplies10,3002Miscellaneous administrative expense9,7002Total$646,800$60It is expected that 7,920 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 10,000 units.Required:1.Prepare an estimated income statement for 20Y7.

Contribution Margin is the difference between Sales and Variable Cost. Break Even Point is a point…

2. What is the expected contribution margin ratio? Round to the nearest whole percent. % 3. Determine the break-even sales in units and dollars. Units units Dollars 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 2$ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $ Percentage: (Round to the nearest whole percent.) % 6. Determine the operating leverage. Round to one decimal place.

2. What is the expected contribution margin ratio? Round to the nearest whole percent. % 3. Determine the break-even sales in units and dollars. Units units Dollars 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 2$ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $ Percentage: (Round to the nearest whole percent.) % 6. Determine the operating leverage. Round to one decimal place.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 17E

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Contribution Margin Ratio, Break-Even Sales, Operating Leverage Elgart Company produces plastic mailboxes. The projected income statement for the coming year follows: Required: 1. Compute the contribution margin ratio for the mailboxes. 2. How much revenue must Elgart earn in order to break even? 3. What is the effect on the contribution margin ratio if the unit selling price and unit variable cost each increase by 15%? 4. CONCEPTUAL CONNECTION Suppose that management has decided to give a 4% commission on all sales. The projected income statement does not reflect this commission. Recompute the contribution margin ratio, assuming that the commission will be paid. What effect does this have on the break-even point? 5. CONCEPTUAL CONNECTION If the commission is paid as described in Requirement 4, management expects sales revenues to increase by 80,000. How will this affect operating leverage? Is it a sound decision to implement the commission? Support your answer with appropriate computations.
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?
Klamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?
Calculate the per-unit contribution margin of a product that has a sale price of $200 if the variable costs per unit are $65.
A product has a sales price of $90 and a per-unit contribution margin of $30. What is the contribution margin ratio?
2. What is the expected contribution margin ratio? Round to the nearest whole percent. 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal place.
a.Explain why contribution margin per unit becomes profit per unit above the break-even point b. If the contribution margin per unit is $7 and the break-even point is 10,000 units, how much profit will a firm make if 15,000 units are sold? c.What is the variable cost ratio? The contribution margin ratio? How are the two ratios related?
Given the following information, answer thequestions:• The ratio of variable cost per unit divided by selling price per unit equals 0.3.• Fixed costs amount to $60,000.(a) Draw the cost-volume-profit chart.(b) What is the break-even point?(c) What effect would an 8% decrease in sellingprice have on the break-even point from part (b)?
1. Fill in the missing numbers in the table. Use the following questions to help fill in the missing numbers in the table: a. What is the total contribution margin? b. What is the total variable expense? c. How many units were sold? d. What is the per-unit variable expense? e. What is the per-unit contribution margin? 2. Answer the following questions about breakeven analysis: a. What is the breakeven point in units? b. What is the breakeven point in sales dollars? 3. Answer the following questions about target profit analysis and safety margin: a. How many units must the company sell in order to earn a profit of $48,000? b. What is the current margin of safety in units? c. What is the margin of safety in sales dollars? d. What is the margin of safety in percentage?
Compute the missing amounts. (Enter the contribution margin ratio to nearest percent, X%.) A Sale price per unit $2,100 Variable costs per unit 840 Total fixed costs 1,045,800 Target profit 1,600,200 Calculate: Contribution margin per unit Contribution margin ratio % Required units to break even Required sales dollars to break even Required units to achieve target profit
Complete the following problems using the following ratios: Sales level at which operating income is zero o If sales above breakeven, then profit o If sales below breakeven, then loss o Fixed expenses = total contribution margin Total sales = total expenses Break Even Point: Unit…
Complete the following problems using the following ratios: Sales level at which operating income is zero o If sales above breakeven, then profit o If sales below breakeven, then loss o Fixed expenses = total contribution margin Total sales = total expenses Break Even Point: Unit Sold = Fixed expenses + Operating Income / Contribution Margin per unit Break Even Point: Sales $ = Fixed expenses + Operating Income / Contribution Margin Ratio Calculate the break even number of units with a target profit of $120,000 if the fixed expenses are $15,000 and the contribution margin is $60 per unit.