Break-Even Units, Contribution Margin Ratio, Margin of SafetyKhumbu Company's projected profit for the coming year is as follows:TotalPer UnitSales$3,407,250$38.50Total variable cost1,431,04516.17Contribution margin$ 1,976,205$ 22.33Total fixed cost1,402,424Operating income$ 573,781Required:1. Compute the break-even point in units. If required, round your answer to nearest whole value.units2. How many units must be sold to earn a profit of $240,000? If required, round your answer to nearest whole value.units3. Compute the contribution margin ratio. If required, round your answer to nearest whole number.%Using the rounded ratio from above, compute the additional profit that Khumbu would earn if sales were $160,000 more than expected.4. For the projected level of sales, compute the margin of safety in units.units

reak-Even Units, Contribution Margin Ratio, Margin of Safety thumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $3,407,250 $38.50 Total variable cost 1,431,045 16.17 Contribution margin $ 1,976,205 $ 22.33 Total fixed cost 1,402,424 Operating income $ 573,781 Required: .. Compute the break-even point in units. If required, round your answer to nearest whole value. units . How many units must be sold to earn a profit of $240,000? If required, round your answer to nearest whole value. units . Compute the contribution margin ratio. If required, round your answer to nearest whole number. % Ising the rounded ratio from above, compute the additional profit that Khumbu would earn if sales were $160,000 more than expected. . For the projected level of sales, compute the margin of safety in units. units

reak-Even Units, Contribution Margin Ratio, Margin of Safety thumbu Company's projected profit for the coming year is as follows: Total Per Unit Sales $3,407,250 $38.50 Total variable cost 1,431,045 16.17 Contribution margin $ 1,976,205 $ 22.33 Total fixed cost 1,402,424 Operating income $ 573,781 Required: .. Compute the break-even point in units. If required, round your answer to nearest whole value. units . How many units must be sold to earn a profit of $240,000? If required, round your answer to nearest whole value. units . Compute the contribution margin ratio. If required, round your answer to nearest whole number. % Ising the rounded ratio from above, compute the additional profit that Khumbu would earn if sales were $160,000 more than expected. . For the projected level of sales, compute the margin of safety in units. units

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 3PA

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Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage 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 therefore assumed 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 during the year. A summary report of these estimates is as follows: It is expected that 12,000 units will be sold at a price of 240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? (Round to one decimal place.) 6. Determine the operating leverage.
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.
Cost-Volume-Profit, Margin of Safety Victoria Company produces a single product. Last years income statement is as follows: Required: 1. Compute the break-even point in units and sales dollars calculated using the break-even units. 2. What was the margin of safety for Victoria last year in sales dollars? 3. Suppose that Victoria is considering an investment in new technology that will increase fixed cost by 250,000 per year but will lower variable costs to 45% of sales. Units sold will remain unchanged. Prepare a budgeted income statement assuming that Victoria makes this investment. What is the new break-even point in sales dollars, assuming that the investment is made?
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?