Handley Documents manufactures paper shredding equipment You are requested to \"
ID: 2489009 • Letter: H
Question
Handley Documents manufactures paper shredding equipment You are requested to "audit" a sampling of computations made by Handleys internal accountants via your independent recalculation of the information. Instructions: Compute the requested information for each of the following independent situations (present supporting calculations) Handley uses a process costing system 900 units were in process at the beginning of the period, 60% complete 16.400 units were started into production during the period; 700 were in process at the end of the period. 30% complete Compute equivalent units for conversion costs Handley sells each unit for $45 Variable costs per unit equal $20. Total fixed costs equal $230,000. Handley is currently selling 12,000 units per period and would like to earn net income of $40,000. Compute: (1) break-even point in dollars; (2) sales units necessary to attain desired income; and (3) margin of safety ratio for current operations. Break-even point = $_______Desired sales = units Margin of safety =________%Explanation / Answer
(a) Computation of Equivalent Production
(b) Given in Questions
Selling Price Per Unit : $45
Variable Cost Per Unit : $20
Fixed Cost : $230000
Current Sale : 12000 Units
Desired Profit : $40000
Contribution/Unit : (Sale Price - Variable Cost) = $45 - $20 = $25
(1) Break-Even Sale (in $) = (Fixed Cost/Contribution Per Unit)*Selling Price Per unit
= ($230000/$25)*45
= $414000
(2) Desired Sales = (Desired Income + Fixed Cost)/Contribution Per Unit
= ($40000 + $230000)/25
= 10800 Units
(3) Margin of Safety = (Current Sale Unit - Break-even Sale in Unit)/Current Sale Unit
= (12000 - 9200)/12000
= 23.33%
Particulars No. of Units Percentage of Completion Equivalent Units Opening Stock 900 60% 540 Completed Unit 15700 100% 15700 Closing Stock 700 30% 210 Total Equivalent Production 16450Related Questions
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