Standard Deluxe Pro Selling price per racket $ 40.00 $ 60.00 $ 90.00 Variable expenses per racket: Production $ 22.00 $ 27.00 $ 31.50 Selling (5% of selling price) $ 2.00 $ 3.00 $ 4.50 All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs: Per Month Fixed production costs $ 122,000 Advertising expense 102,000 Administrative salaries 52,000 Total $ 276,000 Sales, in units, over the past two months have been as follows: Standard Deluxe Pro Total April 2,000 1,000 5,000 8,000 May 8,000 1,000 3,000 12,000 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3. Compute the Racket Division’s break-even point in dollar sales for April. 4. Will the break-even point would be higher or lower with May’s sales mix than with April’s sales mix? 5. Assume that sales of the Standard racket increase by $20,200. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $20,200? Do not prepare income statements; use the incremental analysis approach in determining your answer.
Standard Deluxe Pro Selling price per racket $ 40.00 $ 60.00 $ 90.00 Variable expenses per racket: Production $ 22.00 $ 27.00 $ 31.50 Selling (5% of selling price) $ 2.00 $ 3.00 $ 4.50 All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs: Per Month Fixed production costs $ 122,000 Advertising expense 102,000 Administrative salaries 52,000 Total $ 276,000 Sales, in units, over the past two months have been as follows: Standard Deluxe Pro Total April 2,000 1,000 5,000 8,000 May 8,000 1,000 3,000 12,000 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3. Compute the Racket Division’s break-even point in dollar sales for April. 4. Will the break-even point would be higher or lower with May’s sales mix than with April’s sales mix? 5. Assume that sales of the Standard racket increase by $20,200. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $20,200? Do not prepare income statements; use the incremental analysis approach in determining your answer.
Chapter3: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 5EB: Cadre, Inc., sells a single product with a selling price of $120 and variable costs per unit of $90....
Related questions
Question
| Standard | Deluxe | Pro | ||||
| Selling price per racket | $ | 40.00 | $ | 60.00 | $ | 90.00 |
| Variable expenses per racket: | ||||||
| Production | $ | 22.00 | $ | 27.00 | $ | 31.50 |
| Selling (5% of selling price) | $ | 2.00 | $ | 3.00 | $ | 4.50 |
All sales are made through the company’s own retail outlets. The Racket Division has the following fixed costs:
| Per Month | ||
| Fixed production costs | $ | 122,000 |
| Advertising expense | 102,000 | |
| Administrative salaries | 52,000 | |
| Total | $ | 276,000 |
Sales, in units, over the past two months have been as follows:
| Standard | Deluxe | Pro | Total | |
| April | 2,000 | 1,000 | 5,000 | 8,000 |
| May | 8,000 | 1,000 | 3,000 | 12,000 |
Required:
1-a. Prepare contribution format income statements for April.
1-b. Prepare contribution format income statements for May.
3. Compute the Racket Division’s break-even point in dollar sales for April.
4. Will the break-even point would be higher or lower with May’s sales mix than with April’s sales mix?
5. Assume that sales of the Standard racket increase by $20,200. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $20,200? Do not prepare income statements; use the incremental analysis approach in determining your answer.
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