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Concept explainers
Analyzing CVP relationships
Learning Objectives 2,3,4 2.60.00%
Crandall Company sells flags with team logos. Crandall has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.
Requirements
1. Use the equation approach to compute the number of flags Crandall must sell each year to break even.
2. Use the contribution margin ratio approach to compute the dollar sales Crandall needs to earn $33,000 in operating income for 2018. (Round the contribution margin ratio to two decimal places.)
3. Prepare Crandall’s contribution margin income statement for the year ended December 31,2018, for sales of 70,000 flags. (Round your final answers up to the next whole number.)
4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60 per flag. Compute the new breakeven point in units and in dollars. Should Crandall undertake the expansion? Give your reasoning. (Round your final answers up to the next whole number.)
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Chapter 21 Solutions
Horngren's Accounting: The Managerial Chapters (12th Edition) (loose Leaf Version)
- Learning Tasks A. Discussion Questions: 1. Explain why a contribution margin per unit becomes profit per unit above the breakeven point. 2. Suppose a firm with a contribution margin percentage of 30% increased its advertising expenses by P10,000 and found that sales increased by P 30,000. Was it a good decision to increase advertising expenses? Suppose that the contribution margin ratio is now 40%. Would it be a good decision to increase advertising expense? B. Fill in the blanks for each of the following independent cases. Case Revenues Variable Cost Fixed Cost Total Costs Operating Contribution Income Margin Percentage A P500 P- P800 P1,200 2,000 1,000 В 300 200 C 700 1,000 ---- ---- 1,500 300 40% Assessment Taskarrow_forwardRefer 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?arrow_forwarda. How many pupils do Hannah and Kathleen need to enrell in their class to break even? Contribution Margin per unit = Sales per price-Variable Cost per unit 3D75-12 = 63 per unit %3D Break-even Volume Fixed Cost/Contribution Margin per unit =D1,700/63 per unit %3D = 26.98 or 27 pupils %3D b. If Hannah and Kathleen want to make a profit of $5,000 for the summer, how many pupils do they need to enroll? Pupils need to be enrolled = Fixed Cost + Desired Profit Contribution Margin per unit 1.700 + 5,000/63 per unit 106.3 or 107pupils c. Hannah and Kathleen estimate that they might not be able to enrolI more than 60 pupils. If they enroll this many pupils, how much would they need to charge per pupil in order to realize their profit goal of $5,0007arrow_forward
- Homework Saved Help Gibson Company makes a product that sells for $33 per unit. The company pays $16 per unit for the variable costs of the product and incurs annual fixed costs of $137,700. Gibson expects to sell 21,100 units of product. Required Determine Gibson's margin of safety expressed as a percentage. (Round your percentage answers to 2 decimal places (i.e., 0.2345 should be entered as 23.45).) Margin of safety %arrow_forwardHomework Saved Help Stuart Company makes a product that sells for $33 per unit. The company pays $13 per unit for the variable costs of the product and incurs annual fixed costs of $184,000. Stuart expects to sell 22,200 units of product. Required Determine Stuart's margin of safety expressed as a percentage. (Round your percentage answers to 2 decimal places (i.e., 0.2345 should be entered as 23.45).) Margin of safetyarrow_forwardProblem 2 Cortez Company makes two types of backpacks. Data for the company's activity during a typical month are presented below: Sales units. School Model Hiker Model 40,000 40,000 Selling price per unit. $6 $18 Variable expense per unit... $2 $10 The company's fixed expenses are $80,000. Required: (a) Determine the overall company contribution margin ratio. (b) Determine the break-even point for the company in terms of sales dollars if the sales mix remains constant. (c) Find the margin of safety in terms of sales dollars.. (d) If the sales mix is changed to 60,000 units of the school model and 20,000 units of the hiker model, find the break-even point in terms of sales dollars. Problem 3 Jackson Company operates a cafeteria for its employees. The number of meals served each week over the last seven weeks, along with the total costs of operating the cafeteria are given below: Week 1234567 Meals Served Cafeteria Costs 1,500 $4,800 1,600 $5,080 1,800 $5,280 1,450 $4,900 1,200 $4,000…arrow_forward
- Question Two companies Malcom and Yoda manufacture the similar hand-sanitizing products. The following data for the two companies for the year 2019 are provided below: Malcom ($) Yoda ($) Sales revenue 60,000 72000 Total costs 42,000 48000 Variable Costs 40 % of sales revenue 50% Required: Calculate the Break Even Point (BEP) in dollars of product for each company. Calculate the percentage margin of safety for each company. If sales of the product in Yoda company are equal to 3,000 units, determine the BEP (in units), and present the Break-even chart. I Would like more info on point number 3 with the break even chartarrow_forwardGood afternoon Please answer d i,ii Scent Fragrance Company manufactures and sells several ranges of perfumes. The Average revenue and cost of sales are as follows: Selling price per unit $20.00 Variable costs per unit: Direct materials $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 a) Calculate the contribution margin per unit. b) Calculate the number of units Scent Fragrance Company must sell each year to break even. c) Calculate the number of units Scent Fragrance Company must sell to yield a profit of$144,000. d) Managers may use Sensitivity analysis in their accounting system. i) What is sensitivity analysis? ii) How is Sensitivity analysis useful to managers?arrow_forwardStudent ID #: 11. George Corporation has the following information for the current year: Selling price per Variable costs per unit Fixed costs unit 2$ 10.00 2$ 6.00 $1,000.00 Required: Prepare a cost-volume-profit graph identifying the following items: Total fixed costs line Total variable costs line Total costs line Total revenues line Breakeven point in sales dollars Breakeven point in units Profit area A. B. С. D. Е. F. G. Н. Loss area 6,000 5,000 4,000 3,000 2,000 1,000 Retm 100 200 300 400 500 Earnin Qty (# Units) 3 Dollars ($)arrow_forward
- Learning Objective Product Tango has revenue of $1,150,000, variable cost of goods sold of $850,000, variable selling expenses of $275,000, and fixed costs of $125,000, creating an operating loss of $(100,000). a. Prepare a differential analysis as of February 13 to determine if Product Tango should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue Product Tango (Alt. 1) or Discontinue Product Tango (Alt. 2) February 13 Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) Continue Discontinue Product Product Tango Tango (Alternative 1) (Alternative 2) 1,150,000 0 -825,000 X -275,000 -125,000 100,000 X X X X X Differential Effects (Alternative 2) -1,150,000 850,000 275,000 0 -25,000 b. Determine if Product Tango should be continued (Alternative 1) or…arrow_forwardDownload and fill out the Section 5 Comprehensive Problem Template attached below to complete the problems (ignore question 5-2 as this applies to the "combined accounting and finance" course). Problem 5-1 Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. Required: a. Compute the breakeven point in units. b. Compute the number of units and sales revenue needed to achieve a $20 profit. (Ignore income taxes.) c. Assume that the income tax rate for Redlands is 40%. Compute the number of units and sales revenue needed to achieve an $18 net profit. d. Compute the number of units and sales revenue needed to achieve an 8% profit margin. (Ignore income taxes.) e. Compute the number of units and sales revenue needed to achieve a 12% net profit margin. (Assume a 40% income tax rate.) f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by…arrow_forwardE5-17 (Algo) Determining Cost Behavior, Preparing Contribution Margin Income Statement [LO 5-1, 5-5) Riverside Incorporated makes one model of wooden canoe. Partial information for it follows: Number of Canoes Produced and Sold Total costs Variable costs Fixed costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Total cost per unit Required 1 Required 3 Variable costs Fixed costs 515 $ 72,615 149,300 $ 221,915 Number of Canoes Produced and Sold Total costs Total costs Cost per unit Variable cost per unit Fixed cost per unit Required: 1. Complete the table. 3. Suppose Riverside sells its canoes for $505 each. Calculate the contribution margin per canoe and the contribution margin ratio. 4. Next year Riverside expects to sell 865 canoes. Complete the contribution margin income statement for the company. Required 4 Total cost per unit 7 7 Complete the table. Note: Round your cost per unit answers to 2 decimal places. $ $ 665 $ 7 515 72,615 149,300 221,915 $ 815 0.00…arrow_forward
- Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
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