Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:SalesVariable expensesContribution marginFixed expensesNet operating incomeRequired:Answer each question Independently based on the original data:1. What is the product's CM ratlo?2. Use the CM ratio to determine the break-even point in dollar sales.3. Assume this year's unit sales and total sales increase by 51,000 units and $4,080,000, respectively. If the fixed expenses do notchange, how much will net operating Income Increase?4-a. What is the degree of operating leverage based on last year's sales?4-b. Assume the president expects this year's unit sales to increase by 17%. Using the degree of operating leverage from last year,what percentage increase in net operating Income will the company realize this year?5. The sales manager is convinced that a 10% reduction in the selling price, combined with a $72,000 Increase in advertising, wouldIncrease this year's unit sales by 25%.a. If the sales manager is right, what would be this year's net operating Income if his ideas are Implemented?b. If the sales manager's Ideas are Implemented, how much will net operating Income Increase or decrease over last year?$ 2,080,0001,040,0001,040,000180,000$ 860,0006. The president does not want to change the selling price. Instead, he wants to increase the sales commission by $1.80 per unit. Hethinks that this move, combined with some increase in advertising, would increase this year's unit sales by 25%. How much could thepresident Increase this year's advertising expense and still earn the same $860,000 net operating Income as last year?Complete this question by entering your answers in the tabs below.Req 1Req 2What is the product's CM ratio?CM ratio%Req 3Req 4A11Reg 4BReg 5AReq 2 >Reg 58Rea 6

Hi studentSince there are multiple sub parts, we will answer only first three sub parts. Variable…

Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales variable expenses Contribution margin Fixed expenses Net operating income $ 2,080,000 1,040,000 1,040,000 180,000 $ 860,000 Required: Answer each question Independently based on the original data: 1. What is the product's CM ratlo? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 51,000 units and $4,080,000, respectively. If the fixed expenses do not change, how much will net operating Income Increase?

Feather Friends, Incorporated, distributes a high-quality wooden birdhouse that sells for $80 per unit. Variable expenses are $40.00 per unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows: Sales variable expenses Contribution margin Fixed expenses Net operating income $ 2,080,000 1,040,000 1,040,000 180,000 $ 860,000 Required: Answer each question Independently based on the original data: 1. What is the product's CM ratlo? 2. Use the CM ratio to determine the break-even point in dollar sales. 3. Assume this year's unit sales and total sales increase by 51,000 units and $4,080,000, respectively. If the fixed expenses do not change, how much will net operating Income Increase?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Deuce Sporting Goods manufactures a high-end model tennis racket. The company’s forecasted income statement for the year, before any special orders, is as follows: Fixed costs included in the forecasted income statement are $400,000 in manufacturing cost of goods sold and $200,000 in selling expenses. A new client placed a special order with Deuce, offering to buy 1,000 tennis rackets for $100.00 each. The company will incur no additional selling expenses if it accepts the special order. Assuming that Deuce has sufficient capacity to manufacture 1,000 more tennis rackets, by what amount would differential income increase (decrease) as a result of accepting the special order? (Hint: First compute the variable cost per unit relevant to this decision.)
Olivian Company wants to earn 420,000 in net (after-tax) income next year. Its product is priced at 275 per unit. Product costs include: Variable selling expense is 14 per unit; fixed selling and administrative expense totals 290,000. Olivian has a tax rate of 40 percent. Required: 1. Calculate the before-tax profit needed to achieve an after-tax target of 420,000. 2. Calculate the number of units that will yield operating income calculated in Requirement 1 above. (Round to the nearest unit.) 3. Prepare an income statement for Olivian Company for the coming year based on the number of units computed in Requirement 2. 4. What if Olivian had a 35 percent tax rate? Would the units sold to reach a 420,000 target net income be higher or lower than the units calculated in Requirement 3? Calculate the number of units needed at the new tax rate. (Round dollar amounts to the nearest dollar and unit amounts to the nearest unit.)
Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90. The companys monthly fixed expenses are $180,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of October when they will sell 10,000 units. How many units will Cadre need to sell in order to realize a target profit of $300,000? What dollar sales will Cadre need to generate in order to realize a target profit of $300,000? Construct a contribution margin income statement for the month of August that reflects $2,400,000 in sales revenue for Cadre, Inc.
Sports-Reps, Inc., represents professional athletes and movie and television stars. The agency had revenue of 12,345,000 last year, with total variable costs of 5,678,700 and fixed costs of 2,192,400. Required: 1. What is the contribution margin ratio for Sports-Reps based on last years data? What is the break-even point in sales revenue? 2. What was the margin of safety for Sports-Reps last year? 3. One of Sports-Repss agents proposed that the firm begin cultivating high school sports stars around the nation. This proposal is expected to increase revenue by 230,000 per year, with increased fixed costs of 122,500. Is this proposal a good idea? Explain.
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
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?
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Kerr Manufacturing sells a single product with a selling price of $600 with variable costs per unit of $360. The companys monthly fixed expenses are $72,000. What is the companys break-even point in units? What is the companys break-even point in dollars? Prepare a contribution margin income statement for the month of January when they will sell 500 units. How many units will Kerr need to sell in order to realize a target profit of $120,000? What dollar sales will Kerr need to generate in order to realize a target profit of $120,000? Construct a contribution margin income statement for the month of June that reflects $600,000 in sales revenue for Kerr Manufacturing.