Contribution Margin, CVP, Net Income, Margin of SafetyNail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows:Bottle, packing material $1.15Acrylic base$0.86PigmentsSelling commission0.570.14Other ingredients0.43Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last yearRequired:1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest centper unitWhat is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.)2. How many bottles must be sold to break even?bottlesWhat is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations.$3. What was Nail Glow's operating income last year?4. What was the margin of safety in revenue?5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units.bottlesShould Nail Glow raise the price?

Question
Asked Nov 8, 2019
73 views
Contribution Margin, CVP, Net Income, Margin of Safety
Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows:
Bottle, packing material $1.15
Acrylic base
$0.86
Pigments
Selling commission
0.57
0.14
Other ingredients
0.43
Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year
Required:
1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent
per unit
What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.)
2. How many bottles must be sold to break even?
bottles
What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations.
$
3. What was Nail Glow's operating income last year?
4. What was the margin of safety in revenue?
5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units.
bottles
Should Nail Glow raise the price?
help_outline

Image Transcriptionclose

Contribution Margin, CVP, Net Income, Margin of Safety Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows: Bottle, packing material $1.15 Acrylic base $0.86 Pigments Selling commission 0.57 0.14 Other ingredients 0.43 Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year Required: 1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent per unit What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.) 2. How many bottles must be sold to break even? bottles What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. $ 3. What was Nail Glow's operating income last year? 4. What was the margin of safety in revenue? 5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units. bottles Should Nail Glow raise the price?

fullscreen
check_circle

Expert Answer

Step 1

Hey, since there are multiple questions posted, we will answer first three requirements. If you want any specific requirement to be answered, then please submit that question only or specify the question number in your message.

Step 2

Requirement 1:

a) Calculate the contribution margin per unit for a bottle of nail polish.

Contribution margin per unit Selling price- Unit variable cost
$5.90 $3.15
=$2.75
Working note:
Calculate the unit variable cost
Acrylic base Bottle packing material
Unit variable cost =
+Pigments Selling commission +Other ingre dients
=$0.86 $1.15 $0.57 $0.14 $0.43
= $3.15
help_outline

Image Transcriptionclose

Contribution margin per unit Selling price- Unit variable cost $5.90 $3.15 =$2.75 Working note: Calculate the unit variable cost Acrylic base Bottle packing material Unit variable cost = +Pigments Selling commission +Other ingre dients =$0.86 $1.15 $0.57 $0.14 $0.43 = $3.15

fullscreen
Step 3

b) Calculate the contribution mar...

Contribution margin per unit
Contribution margin ratio
Selling price
$2.75
$5.9
= 0.4661
help_outline

Image Transcriptionclose

Contribution margin per unit Contribution margin ratio Selling price $2.75 $5.9 = 0.4661

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Related Accounting Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Marigold Corp., organized in 2020, has the following transactions related to intangible assets. ...

A: A patent is the conceding of a right to the of a property by the government to the inventor.Goodwill...

question_answer

Q: Q. question 5

A: Dividends: This is the amount of cash distributed to stockholders by a company out its earnings, acc...

question_answer

Q: Foster Corporation purchased a new machine for its assembly process on August 1, 2020. The cost of t...

A: Compute straight-line depreciation rate.

question_answer

Q: Susan is a single taxpayer, 26 years of age, with AGI of $28,000 and no tax-exempt income. She did n...

A: As per IRS it is mandatory to file 1040 form if the income earned in year 2018 is $12,000 or more fo...

question_answer

Q: Accounting principal 2  chapter-14 Q:- On April 1,2019 Cowell Company issued $3000000, 20 year year,...

A: Bonds: Bonds are long-term promissory notes that are issued by a company while borrowing money from ...

question_answer

Q: Exercise 8-08 On March 3, Metlock, Inc. sells $719,600 of its receivables to Western Factors Inc. W...

A: Receivables: Receivables refer to an amount to be received in future. General classifications of rec...

question_answer

Q: Brief Exercise 9-02 Cullumber Company incurs these expenditures in purchasing a truck: cash price $...

A: Capital Expenditure: These costs are incurred to extend the useful life, production capacity, and op...

question_answer

Q: Calvin reviewed his cancelled checks and receipts this year for charitable contributions, which incl...

A: Maximum remaining contributions.

question_answer

Q: Gage’s accounting records included the following information: Inventory, 01-01-15                   ...

A: Estimated loss from any shoplifted items: