Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs $190,000 $115,000 $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (c) Calculate Valencia's break-even point in units and in sales dollars.
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs $190,000 $115,000 $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (c) Calculate Valencia's break-even point in units and in sales dollars.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 8P: The production of a new product required Zion Manufacturing Co. to lease additional plant...
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