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Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand production into sweet rolls as well. The average price of a loaf of bread is $1. Anticipated price for a package of sweet rolls is $1.50. Costs for the new level of production are as follows: Other data: Busy-Bee believes it can sell 600,000 loaves of bread and 200,000 packages of sweet rolls in the coming year. Required: 1. Prepare a contribution-margin-based income statement for next year. Be sure to show sales and variable costs by product and in total. 2. Compute the break-even sales for the company as a whole using conventional analysis. 3. Compute the break-even sales for the company as a whole using activity-based analysis. 4. Compute the break-even units of each product in units. Does it matter whether you use conventional analysis or activity-based analysis? Why or why not? 5. Suppose that Busy-Bee could reduce the setup cost by $100 per setup and could reduce the number of maintenance hours needed to 1,000. How many units of each product must be sold to break even in this case? (Round answers up to whole units.)

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Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663

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Chapter
Section
BuyFindarrow_forward

Cornerstones of Cost Management (C...

4th Edition
Don R. Hansen + 1 other
Publisher: Cengage Learning
ISBN: 9781305970663
Chapter 16, Problem 25E
Textbook Problem
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Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand production into sweet rolls as well. The average price of a loaf of bread is $1. Anticipated price for a package of sweet rolls is $1.50. Costs for the new level of production are as follows:

Chapter 16, Problem 25E, Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand , example  1

Other data:

Chapter 16, Problem 25E, Busy-Bee Baking Company produces a variety of breads. The plant manager would like to expand , example  2

Busy-Bee believes it can sell 600,000 loaves of bread and 200,000 packages of sweet rolls in the coming year.

Required:

  1. 1. Prepare a contribution-margin-based income statement for next year. Be sure to show sales and variable costs by product and in total.
  2. 2. Compute the break-even sales for the company as a whole using conventional analysis.
  3. 3. Compute the break-even sales for the company as a whole using activity-based analysis.
  4. 4. Compute the break-even units of each product in units. Does it matter whether you use conventional analysis or activity-based analysis? Why or why not?
  5. 5. Suppose that Busy-Bee could reduce the setup cost by $100 per setup and could reduce the number of maintenance hours needed to 1,000. How many units of each product must be sold to break even in this case? (Round answers up to whole units.)

1.

To determine

Draw up the contribution margin based income statement.

Explanation of Solution

Income statement: The financial statement which reports revenues and expenses from business operations and the result of those operations as net income or net loss for a particular time period is referred to as income statement.

Operating income: Operating income refers to the income generated from the operation of

business, or the revenue generated from the services offered by the company.

Prepare the contribution margin based income statement:

ParticularsBreadSweet Roll...

2.

To determine

Compute the break-even point using the conventional analysis.

3.

To determine

Compute the break-even point using the activity-based analysis.

4.

To determine

Calculate the break-even for given products and analyze if any difference is there if the computation method is different.

5.

To determine

Compute the break-even point, if the setup cost is reduced by $100 and maintenance hours is reduced to 1,000 hours.

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Chapter 16 Solutions

Cornerstones of Cost Management (Cornerstones Series)
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