(SHOW ALL COMPUTATIONS or no credit given) Brunswick Corporation sells bowling b

Question

(SHOW ALL COMPUTATIONS or no credit given)

Brunswick Corporation sells bowling bags and has developed the following information: Sales revenue Variable cost of goods sold Fixed cost of goods sold Variable operating expenses Fixed operating expenses $2,500,000 65% of sales $152,000 5% of sales! $520,000 For the year ended December 31, 2017, Brunswick Corporation sold 62,500 bowling bags. Instructions-*xSHOW ALL COMPUTATIONS for this problem OR NO CREDII produced and GIVEN (a) Prepare a detailed CVP income statement using the contribution margirn format for Brunswick Corporation for 2017 (b) Compute the contribution margin per unit. (c) Compute the contribution margin ratio. (d) Compute the break-even point in dollars. (e) Compute the margin of safety in dollars. (f) Compute the margin of safety ratio. g) Compute the number of bowling bags to be sold to earn a target income of $383,000

Explanation / Answer

(a)

Brunswick Corporation

CVP Income Statement

(b)

Contribution margin per unit = Selling price per unit - Variable expenses per unit

= 40 -28

= 12

(c)

Contribution margin ratio = Contribution margin / Sales revenue

= 750,000 / 2,500,000

= 30%

(d)

Breakeven point in dollars = Fixed expenses / Contribution margin percenatge

= (152,000 + 520,000) / 0.3

= 2,240,000

(e)

Margin of safety in dollars = Sales revenues - Breakeven revenues

= 2,500,000 - 2,240,000

= 260,000

(f)

Margin of safety ratio = Margin of safety / Sales revenues

= 260,000 / 2,500,000

= 10.4%

(g)

Units to be sold to earn desired income = (fixed expenses + desired income) / contribution margin per unit

= (672,000 + 383,000) / 12

= 87,917 units

Total Per Unit Sales revenue 2,500,000 40 (2,500,000/62,500) Variable expenses : Cost of goods sold 1,625,000 (2,500,000*65%) 26 (1,625,000/62,500) Operating expenses 125,000 (2,500,000*5%) 2(125,000/62,500) Contribution margin 750,000 12 Fixed expenses : Cost of goods sold 152,000 Operating expenses 520,000 Net income 78,000

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