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1. 1- The following information has been provided by Lightning Energy Bars, Inc.

ID: 2374809 • Letter: 1

Question


1.      1- The following information has been provided by Lightning Energy Bars, Inc. for the month of September, when they sold 100,000 units:

Cost of goods sold

$   600,000

Fixed administrative expenses

220,000

Fixed selling expenses

80,000

Sales

1,500,000

Variable administrative expenses

60,000

Variable selling expense

240,000

(a)    What was the company%u2019s TOTAL contribution margin for September?

(b)   What was the company%u2019s contribution margin per unit?

(c)    What was the company%u2019s CM ratio?

(d)   What is the company%u2019s break-even point, in terms of units?

(e)   I f the company has a target profit of $600,000, how many units do they need to sell?

2.       2-Fork Plastics has examined its utilities expense for May and June. In May, the company used 2,200 machine-hours and spent $18,600 in utilities. During June the company used 2,650 machine hours and spent $21,300. Assuming utilities can be identified as a mixed cost, Fork uses the high-low method to estimate a line for utilities expense.

What line would estimate utilities?

Please show your work to estimate this line, and write it as Y = a + bx

Cost of goods sold

$   600,000

Fixed administrative expenses

220,000

Fixed selling expenses

80,000

Sales

1,500,000

Variable administrative expenses

60,000

Variable selling expense

240,000

Explanation / Answer

1) a) Total Contribution Margin = Sales - Total Cost

= 1,500,000 - (600,000+220,000+80,000)

= 600,000

b) Contribution Margin Per Unit = Total Contribution Margin/Units sold

= 600,000/100,000

= 6

c) CM ration = Total Contribution Margin/Sales

= 600,000/1,500,000

= 0.4

d) Break Even Point(in terms of units) = Total Fixed Cost/(Price-Value)

Break Even Point(in terms of units) = Total Fixed Cost X No. of units sold/(Sales-Cost of goods)

Break Even Point(in terms of units) = (220,000+80,000) X 100,000 / (1,500,000-600,000)

Break Even Point(in terms of units) = 300,000/9

Break Even Point(in terms of units) = 33,333

e)No. of units = Total profit/Contribution Margin Per Unit

No. of units = 600,000/6

No. of units = 100,000


2) Y = a + bx

Y1 = a + bx1

18,600 = a + b.2,200

Y2 = a + bx2

21,300 = a + b.2,650

Y2 = a + bx2

-Y1 = a + bx1

----------------------

2,700 = b.450

b = 6

substituing in any eqn. we get

a = 5,400

Y = 5,400 + 6.x