Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The comp

Question

Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them to retail department stores throughout the country. The standard set sells for $64, and the deluxe set sells for $79. The variable expenses associated with each set are given below Standard Deluxe 17.00 s32.00 Production costs Sales commissions (17% of 10.88 sales price) The company's fixed expenses each month are Advertising s107,000 Depreciation Administrative $22,300 $64,000 Salespersons are paid on a commission basis to encourage them to be aggressive in their sales efforts. Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, in sets, for the last two months are given below Standard Deluxe Total 2,200 6,400 May 1,200 5,200 Required 1- Prepare contribution format income statements for April. Round "Total a. percent" answers to 1 decimal place (i.e .1234 should be entered as 12.3)

Explanation / Answer

Contribution income statement for April 4,200 2,200 Standard Deluxe Total Amount % Amount % amount % Sales 268800 100% 173800 100% 442600 100% variable expenses production costs 71400 26.6% 70400 40.5% 141800 32.0% Sales commission 45696 17.0% 29546 17.0% 75242 17.0% total variable expense 117096 43.6% 99946 57.5% 217042 49.0% Contributin margin 151704 56.4% 73854 42.5% 225558 51.0% fixed expense: Advertising 107,000 Depreciation 22,300 Administrative 64,000 total fixed expense 193,300 net income 32,258 Contribution income statement for April 1,200 5,200 Standard Deluxe Total Amount % Amount % amount % Sales 76800 100% 410800 100% 487600 100% variable expenses production costs 20400 26.6% 166400 40.5% 186800 38.3% Sales commission 13056 17.0% 69836 17.0% 82892 17.0% total variable expense 33456 43.6% 236236 57.5% 269692 55.3% contribution margin 43344 56.4% 174564 42.5% 217908 44.7% fixed expense: Advertising 107,000 Depreciation 22,300 Administrative 64,000 total fixed expense 193,300 net income 24,608 3a ) Break even point in dollar sales = 193,300/51% 379020 3b) higher

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