JHJ PUBLISHING production cost info is as follows Raw materials paper(variable)
ID: 2553429 • Letter: J
Question
JHJ PUBLISHING production cost info is as follows Raw materials paper(variable) Raw material ink (variable) 1 reams @ $10 each 2 cartridges $20 each 1 hour@$10 each Direct labor (variable) . Manufacturing overhead (fixed) $100,000 Administrative expenses (fixed) $40,000 Unit selling price Determine required production levels: 4 times unit variable cost 1. Quantity required to loose $100,000 2. Quantity required to break even 3. Quantity required to earn $1,000,000 4. Net income if only one book is sold 5. Complete table below: INCOME/EXPENSES! SALE OF TARGET I TARGET BREAK- ONE BOOK S100,00 LOSS OF EVEN INCOME OF $1,000,000 SALES LESS VARIABLE COSTS TOTAL VARIABLE COSTS CONTRIBUTION MARGIN LESS FIXED COSTS NET INCOMEExplanation / Answer
Cost Sheet
Raw Material Paper
$ 10
=1*10
Raw Material Ink
$ 40
=2*20
Direct Labor
$ 10
=1*10
Total Variable Cost
$ 60
selling Price
$ 240
=4*60
Contribution
$ 180
=240-60
Manufacturing Overhead
$ 100,000
Administrative expense
$ 40,000
Total Fixed Costs
$ 140,000
1. Lose - 100000
For lose of $100,000 , fixed expenses only to the extend of $40,000 need to be covered
= 40000 / Contribution per unit
=40000 / 180
222
units
2. Break Even
For break even the fixed costs amounting $140,000 need to be covered
= 140000 / Contribution per unit
=140000 / 180
778
units
3. Earn - $1,000,000
To earn a profit of $1,000,000, the contribution margin required is 1,000,000 + 140,000 = $1,140,000
= 1140000 / Contribution per unit
=1140000 / 180
6,333
units
4. Only one book is sold
The calculation will be based upon the no. of units required to complete the book
Cost Sheet
Raw Material Paper
$ 10
=1*10
Raw Material Ink
$ 40
=2*20
Direct Labor
$ 10
=1*10
Total Variable Cost
$ 60
selling Price
$ 240
=4*60
Contribution
$ 180
=240-60
Manufacturing Overhead
$ 100,000
Administrative expense
$ 40,000
Total Fixed Costs
$ 140,000
1. Lose - 100000
For lose of $100,000 , fixed expenses only to the extend of $40,000 need to be covered
= 40000 / Contribution per unit
=40000 / 180
222
units
2. Break Even
For break even the fixed costs amounting $140,000 need to be covered
= 140000 / Contribution per unit
=140000 / 180
778
units
3. Earn - $1,000,000
To earn a profit of $1,000,000, the contribution margin required is 1,000,000 + 140,000 = $1,140,000
= 1140000 / Contribution per unit
=1140000 / 180
6,333
units
4. Only one book is sold
The calculation will be based upon the no. of units required to complete the book
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