6. Calculate the “Per unit” cost. Total Per Unit Sales (600 Units) $120,000 Vari

ID: 2482458 • Letter: 6

Question

6. Calculate the “Per unit” cost.

Total Per Unit

Sales (600 Units) $120,000

Variable Expenses 80,000_________________

Contribution Margin 40,000

Fixed Expenses 30,000

Net Operating Income 10,000_________________

7. Calculate the “Percentage of sales”.

Total Per Unit % of sales

Sales (400 units) $80,000 $200

Variable Expenses 60,000 150__________________

Contribution Margin 20,000 $50

Fixed Expenses 15,000

Net Operating Income 5,000

8. Calculate the “units.”

Total Per Unit

Sales (??? Units) $120,000 $200

Variable Expenses 90,000 100

Contribution Margin 30,000 $50

Net Operating Income 10,000

20,000 Units________

9. Calculate the “Total” cost.

Total Per Unit

Sales (700 units) $150

Variable Expenses 100

Contribution Margin $50

10. Compute the Break-even point in units and total sales dollars using the contribution margin method.

Per Unit % of sales

Sales $100 100%

Variable Expenses $60 60%

Contribution Margin $40 40%

Fixed Expenses $12,000

Break-even in units= _____________

Break-even in total sales dollars=____________

11. Calculate the break-even point in units and total sales dollars using the equation method.

Total Per Unit % of sales

Sales $90 100%

Variable Expenses $60 67%

Contribution Margin $30 33%

Fixed Expenses $18,000

Break-even in units=____________

Break-even in total sales dollars=___________

12. Using the Contribution Margin Method to calculate Target Profit sales and units given a target profit of $40,000.

Total Per Unit % of sales

Sales $200 100%

Variable Expenses 170 68%

Contribution Margin 80 32%

Fixed Expenses 20,000

Target Profit Break-even units=____________

Target Profit Break-even sales=_____________

13. Compute the Margin of Safety and the Margin of Safety Percentage from the data below.

Selling Price $90 per unit

Variable Expenses $45 per unit

Fixed Expenses $18,000

Unit Sales 1,000 units

Margin of Safety ______________

Margin of Safety Percentage____________

14. Pringle Company distributes a single product. The company’s sales and expenses for a recent month follow:

Total Per Unit

Sale $600,000 $50

Variable Expenses 456,000 38

Contribution Margin 144,000 $12

Fixed Expenses 100,000

Net Operating Income 44,000

What is the monthly break-even point in units sold and in sales dollars?

Without resorting to computations, what is the total contribution margin at break-even point?

How many units would have to be sold each month to earn a target profit of $21,000?

Use the contribution method. Verify your answer by preparing a contribution format income statement at the target level of sales.

Refer to original data. Compute the company’s margin of safety in both dollar and percentage terms.

What is the company’s CM Ratio? If monthly sales increases by $60,000 and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?

15. Reveen Products sells camping equipment. One of the company’s products, a camp lantern, sells for $100 per unit. Variable expenses are $60 per lantern, and fixed expenses associated with the lantern total $120,000 per month.

1. Compute the company’s break-even point in number of lanterns and total sales dollars.

2. If the variable expenses per lantern increase as a percentage of the selling price, will it result in higher or lower break-even point? Why? (Assume that the fixed expenses remain unchanged.)

3. At present, the company is selling 6,000 lanterns per month. The sales margin is convinced that a 10% reduction in the selling price will result in a 25% increase in the number of lanterns sold each month. Prepare two contribution income statements, would one under the present operating conditions, and one as operations appear after the proposed changes. Show both and per unit data on your statements.

4. Refer to the data in (3) above. How many lanterns would have to be sold at the new selling price to yield a minimum net operating income of $60,000 per month?