RantauBags Company plans to sell 10,000 handbags at $400 each in the coming year. Data on cost per handbag are as follows: $80 $125 $15 Direct materials Direct labour Variable overhead Variable selling expense is a commission of 5 per cent of the sales price. Total fixed factory overhead amounts to $800,000. Fixed selling and administrative expense totalled $400,000. Required: (a) Prepare a contribution margin income statement for RantauBags for the coming year. (3 marks) (b) What is the effect on RantauBags operating income if 13,000 units are manufactured and sold next year? Show computation. (2 marks) (c) Calculate the number of units RantauBags must sell to breakeven. (2 marks) (d) Calculate the number of units RantauBags must sell to achieve a target operating income of $240,000. (3 marks) (e) Calculate the margin of safety in sales ($) for the coming year.

RantauBags Company plans to sell 10,000 handbags at $400 each in the coming year. Data on cost per handbag are as follows: $80 $125 $15 Direct materials Direct labour Variable overhead Variable selling expense is a commission of 5 per cent of the sales price. Total fixed factory overhead amounts to $800,000. Fixed selling and administrative expense totalled $400,000. Required: (a) Prepare a contribution margin income statement for RantauBags for the coming year. (3 marks) (b) What is the effect on RantauBags operating income if 13,000 units are manufactured and sold next year? Show computation. (2 marks) (c) Calculate the number of units RantauBags must sell to breakeven. (2 marks) (d) Calculate the number of units RantauBags must sell to achieve a target operating income of $240,000. (3 marks) (e) Calculate the margin of safety in sales ($) for the coming year.

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Description: RantauBags Company plans to sell 10,000 handbags at $400 each in the coming year. Data on cost perhandbag are as follows:$80$125$15Direct materialsDirect labourVariable overheadVariable selling expense is a commission of 5 per cent of the sales pric

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 2CE

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