Sheridan Company sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus) based upon quantity of units sold. Q-Drive has a unit variable cost of $120 and a selling price of $210. Q-Drive Plus has a unit variable cost of $100 and a selling price of $180. The weighted-average unit contribution margin for Sheridan is

Sheridan Company sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus) based upon quantity of units sold. Q-Drive has a unit variable cost of $120 and a selling price of $210. Q-Drive Plus has a unit variable cost of $100 and a selling price of $180. The weighted-average unit contribution margin for Sheridan is

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 29BEB: Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in...

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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.
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Sales Needed to Earn Target Income Chillmax Company plans to sell 3,500 pairs of shoes at 60 each in the coming year. Variable cost is 35% of the sales price; contribution margin is 65% of the sales price. Total fixed cost equals 78,000 (includes fixed factory overhead and fixed selling and administrative expense). Required: 1. Calculate the sales revenue that Chillmax must make to earn operating income of 81,900 by using the point in sales equation. 2. Check your answer by preparing a contribution margin income statement based on the sales dollars calculated in Requirement 1.
Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is 6. Total fixed cost is 10,000. Required: 1. Prepare a CVP graph with Units Sold as the horizontal axis and Dollars as the vertical axis. Label the break-even point on the horizontal axis. 2. Prepare CVP graphs for each of the following independent scenarios: (a) Fixed cost increases by 5,000, (b) Unit variable cost increases to 7, (c) Unit selling price increases to 12, and (d) Fixed cost increases by 5,000 and unit variable cost is 7.
Morris Industries manufactures and sells three products (AA, BB, and CC). The sales price and unit variable cost for the three products are as follows: Their sales mix s reflected as a ratio of 5:3:2. Annual fixed costs shared by the three products are $25,000 per year. What are total variable costs for Morris with their current product mix? Calculate the number of units of each product that will need to be sold in order for Morris to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.
Refer to Cornerstone Exercise 3.4 for data on Dohini Manufacturing Companys purchasing cost and number of purchase orders. The controller for Dohini Manufacturing ran regression on the data, and the coefficients shown by the regression program are: Required: 1. Construct the cost formula for the purchasing activity showing the fixed cost and the variable rate. 2. If Dohini Manufacturing Company estimates that next month will have 430 purchase orders, what is the total estimated purchasing cost for that month? (Round your answer to the nearest dollar.) 3. What if Dohini Manufacturing wants to estimate purchasing cost for the coming year and expects 5,340 purchase orders? What will estimated total purchasing cost be? (Round your answer to the nearest dollar.) What is the total fixed purchasing cost? Why doesnt it equal the fixed cost calculated in Requirement 1?
Caribbean Hammocks currently sells 75.000 units at $50 per unit. Its expenses are: Management believes it can increase sales by 5,000 units for every $5 decrease in sales price. It also believes the additional sales will allow a decrease in direct material of $1 for each additional 5,000 units. Prepare a flexible budgeted income statement for 75,000-, 80,000-, and 85,000-unit sales.
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?