Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year: In May of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker systems for a major automobile company. The program was housed in research and development. In the beginning of the current year, Kicker’s accounting department exercised tighter control over sales commissions, ensuring that no dubious (e.g., double) payments were made. The increased sales in the current year required additional warehouse space that Kicker rented in town. (Round ratios to four decimal places. Round sales dollars computations to the nearest dollar.) Required: 1. Calculate the contribution margin ratio for May of both years. 2. Calculate the break-even point in sales dollars for both years. 3. Calculate the margin of safety in sales dollars for both years. 4. CONCEPTUAL CONNECTION Analyze the differences shown by your calculations in Requirements 1, 2, and 3.

BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773
BuyFind

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
Publisher: Cengage Learning
ISBN: 9781337115773

Solutions

Chapter 7, Problem 64P
Textbook Problem

Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year:

Chapter 7, Problem 64P, Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of

In May of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker systems for a major automobile company. The program was housed in research and development. In the beginning of the current year, Kicker’s accounting department exercised tighter control over sales commissions, ensuring that no dubious (e.g., double) payments were made. The increased sales in the current year required additional warehouse space that Kicker rented in town. (Round ratios to four decimal places. Round sales dollars computations to the nearest dollar.)

Required:

  1. 1. Calculate the contribution margin ratio for May of both years.
  2. 2. Calculate the break-even point in sales dollars for both years.
  3. 3. Calculate the margin of safety in sales dollars for both years.
  4. 4. CONCEPTUAL CONNECTION Analyze the differences shown by your calculations in Requirements 1, 2, and 3.

Expert Solution

Want to see the full answer?

Check out a sample textbook solution.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.

Chapter 7 Solutions

Managerial Accounting: The Cornerstone of Business Decision-Making
Ch. 7 - Explain how a change in sales mix can change a...Ch. 7 - Define the term margin of safety. Explain how it...Ch. 7 - Explain what is meant by the term operating...Ch. 7 - How can sensitivity analysis be used in...Ch. 7 - Why is a declining margin of safety over a period...Ch. 7 - If the variable cost per unit goes down,Ch. 7 - The amount of revenue required to earn a targeted...Ch. 7 - Break-even revenue for the multiple-product firm...Ch. 7 - In the cost-volume-profit graph, a. the break-even...Ch. 7 - An important assumption of cost-volume-profit...Ch. 7 - The use of fixed costs to extract higher...Ch. 7 - If the margin of safety is 0, then a. the company...Ch. 7 - The contribution margin is the a. amount by which...Ch. 7 - Dartmouth Company produces a single product with a...Ch. 7 - Dartmouth Company produces a single product with a...Ch. 7 - If a companys total fixed cost decreases by...Ch. 7 - Solemon Company has total fixed cost of 15,000,...Ch. 7 - Variable Cost, Fixed Cost, Contribution Margin...Ch. 7 - Break-Even Point in Units Head-First Company plans...Ch. 7 - Variable Cost Ratio, Contribution Margin Ratio...Ch. 7 - Break-Even Point in Sales Dollars Head-First...Ch. 7 - Units to Earn Target Income Head-First Company...Ch. 7 - Sales Needed to Earn Target Income Head-First...Ch. 7 - Break-Even Point in Units for a Multiple-Product...Ch. 7 - Break-Even Sales Dollars for a Multiple-Product...Ch. 7 - Margin of Safety Head-First Company plans to sell...Ch. 7 - Degree of Operating Leverage Head-First Company...Ch. 7 - Impact of Increased Sales on Operating Income...Ch. 7 - Variable Cost, Fixed Cost, Contribution Margin...Ch. 7 - Break-Even Point in Units Chillmax Company plans...Ch. 7 - Variable Cost Ratio, Contribution Margin Ratio...Ch. 7 - Break-Even Point in Sales Dollars Chillmax Company...Ch. 7 - Units to Earn Target Income Chillmax Company plans...Ch. 7 - Sales Needed to Earn Target Income Chillmax...Ch. 7 - Suppose that Chillmax Company now sells both pairs...Ch. 7 - Break-Even Sales Dollars for a Multiple-Product...Ch. 7 - Margin of Safety Chillmax Company plans to sell...Ch. 7 - Degree of Operating Leverage Chillmax Company...Ch. 7 - Impact of Increased Sales on Operating Income...Ch. 7 - Basic Break-Even Calculations Suppose that Larimer...Ch. 7 - Price, Variable Cost per Unit, Contribution...Ch. 7 - Contribution Margin Ratio, Variable Cost Ratio,...Ch. 7 - Income Statement, Break-Even Units, Units to Earn...Ch. 7 - Units Sold to Break Even, Unit Variable Cost, Unit...Ch. 7 - Margin of Safety Comer Company produces and sells...Ch. 7 - Contribution Margin, Unit Amounts, Break-Even...Ch. 7 - Sales Revenue Approach, Variable Cost Ratio,...Ch. 7 - Cherry Blossom Products Inc. produces and sells...Ch. 7 - Cherry Blossom Products Inc. produces and sells...Ch. 7 - Texas-Q Company produces and sells barbeque...Ch. 7 - Lotts Company produces and sells one product. The...Ch. 7 - Klamath Company produces a single product. The...Ch. 7 - Margin of Safety and Operating Leverage Medina...Ch. 7 - Parker Pottery produces a line of vases and a line...Ch. 7 - Jellico Inc.s projected operating income (based on...Ch. 7 - Break-Even Units, Contribution Margin Ratio,...Ch. 7 - Break-Even Units, Operating Income, Margin of...Ch. 7 - Aldovar Company produces a variety of chemicals....Ch. 7 - Basu Company produces two types of sleds for...Ch. 7 - Cost-Volume-Profit Equation, Basic Concepts,...Ch. 7 - Contribution Margin Ratio, Break-Even Sales,...Ch. 7 - Carlyle Lighting Products produces two different...Ch. 7 - Polaris Inc. manufactures two types of metal...Ch. 7 - Cost-Volume-Profit, Margin of Safety Victoria...Ch. 7 - Abraham Company had revenues of 830,000 last year...Ch. 7 - Solve the following independent problems....Ch. 7 - Candyland Inc. produces a particularly rich...Ch. 7 - Income statements for two different companies in...Ch. 7 - Suppose that Kicker had the following sales and...Ch. 7 - Danna Lumus, the marketing manager for a division...Ch. 7 - Cost-Volume-Profit Analysis, Single-Product...Ch. 7 - Cost-Volume-Profit Analysis, Single-Product...Ch. 7 - The hotels accounting system data show an average...Ch. 7 - Cost Classification a. Classify the manufacturing...Ch. 7 - Sensitivity Cost-Volume-Profit Analysis and...Ch. 7 - Calculate the hotels margin of safety (both in...

Additional Business Textbook Solutions

Find more solutions based on key concepts
How does a Pareto chart assist management?

Financial And Managerial Accounting

Why do firms use event sponsorship?

Foundations of Business (MindTap Course List)

Explain the following statement: Our tax rates are progressive.

Fundamentals of Financial Management (MindTap Course List)

Why do economists sometimes offer conflicting advice to policymakers?

Principles of Microeconomics (MindTap Course List)

Is an initial public offering an example of a primary or a secondary market transaction? Explain.

Fundamentals of Financial Management, Concise Edition (MindTap Course List)

What is inflation and what causes it?

Essentials of Economics (MindTap Course List)

Why is the NFV of a relatively long-term project (one for which a high percentage of its cash flows occurs in t...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must a signature card be filled out and signed to open a checking account?

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

What, in your own words, does BR entail?

Pkg Acc Infor Systems MS VISIO CD

What is new about new growth theory?

Economics (MindTap Course List)