Bill\'s Ball Bearings buys ball bearings in bulk from Beijing. Bill\'s box them

Question

Bill's Ball Bearings buys ball bearings in bulk from Beijing. Bill's box them in up in 1 pound boxes for shipping across the U.S. They have 2 Products - Basic & Beautiful Here are the pertinent data: Basic Beautiful Sales price per box $4.00 $5.00 Variable Costs $2.95 $3.80 Fixed Costs $15,000.00 Please answer the following: Show your work! 1. What is the Contribution Margin per box of bearings? 2. What is the Break-even Point in boxes of bearings sold? If the ratio of sales is 3 basic for every 2 Beautiful boxes sold 3. Prepare an Income Statement showing the Break-even Point    4. How many boxes of bearings need to be sold to make $2,000 in Profit? Use an income tax rate of 40% 5. Prepare an Income Statement showing the $2,000 Profit ? Bill's Ball Bearings buys ball bearings in bulk from Beijing. Bill's box them in up in 1 pound boxes for shipping across the U.S. They have 2 Products - Basic & Beautiful Here are the pertinent data: Basic Beautiful Sales price per box $4.00 $5.00 Variable Costs $2.95 $3.80 Fixed Costs $15,000.00 Please answer the following: Show your work! 1. What is the Contribution Margin per box of bearings? 2. What is the Break-even Point in boxes of bearings sold? If the ratio of sales is 3 basic for every 2 Beautiful boxes sold 3. Prepare an Income Statement showing the Break-even Point    4. How many boxes of bearings need to be sold to make $2,000 in Profit? Use an income tax rate of 40% 5. Prepare an Income Statement showing the $2,000 Profit ?

Explanation / Answer

1. Contribution Margin per box of bearings:

Basic Beautiful

Sales price per box $4 $5

Less: Variable cost per box $2.95 $3.80

Contributtion per box $1.05 $1.20

2.If the ratio of sales is 3 basic for every 2 Beautiful boxes sold & fixed cost is $15,000, then contribution for every 5 units sold = 3*1.05+2*1.20

=$5.55

Breakeven point = 15000/5.55 =2703 boxes (rounded off)

Hence, share of basic boxes= 2703*3 = 8109 boxes

Hence, share of Beautiful boxes = 2703*2 =5406 boxes

3. INCOME SATETMENT

PARTICULARS BASIC($) BEAUTIFUL($) TOTAL

SALES 32,436 27,030

LESS:VARIABLE COST 23,923 20,543

CONTRIBUTION 8,513 6,487 15,000

LESS: FIXED COSTS 15,000

PROFITS/(LOSSES) NIL

4.To make a post tax profit of $2,000; the company needs to make a pre tax proft of $3333.33 or 3333(rounded off). Keeping the ratio of sales fixed at 3 basic for every 2 beautiful, the company would need to sell:

Contributio for every 5 units sold = $5.55

Overall contibution required to make pre tax profit of $3333. = 15000+3333 = 18333

Numer of boxes required = 18333/5.55 = 3303.24

Basic boxes = 3303.24*3 = 9910(rounded off)

Beautiful boxes = 3303.24*2 = 6606 ( rounded off)

Note: Only first 4 questions are answered as per Chegg's policy

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