Exam# 309 Mike\'s Mulfins is a specialty bakery that crea raditional fiamily reo

Question

Exam# 309 Mike's Mulfins is a specialty bakery that crea raditional fiamily reojpe. has the following 2018 information for the Cho The company 2018 Sales Volume Sales price per unit 21,000 Unt $ 1.50 $ 0.60 $ 7,800 Variable costs per unit Annual fixed costs anore income taxes in your calculations Required: show all calculations for each of the following: a) Prepare the contribution margin format income statement for 2018. (3 marks) b) Calculate the breakeven point in BOTH i) units and i) sales dollars. (3 marks) c) How many units must the company sell to reach a target profit of $18,500? (3 marv d) Using the information calculated in part a), calculate net income for 2018 if the original sales volume forecast were to increase by 5%. (4 marks) Page Fall 2017 ACCT 2250

Explanation / Answer

a)income statement

sales (21000*1.5) $ 31500

less variable cost $12600

contribution margin $18900

less fixed cost $ 7800

net profit $ 11100

b) break even point in units = fixed cost / contribution margin per unit

= 7800/ $1.50 - .60

= 8667

break even point in dollar = sale price per unit * break even point in units

= $1.50* 8667

= $ 13000

c) when target profit = $18500

let ythe sales units be x

therefore

$18500 = 1.50x- .60 x - 7800

x = 29222

d) when the sales volume increases by 5%

sales 22050*1.50 $33075

less variable cost $13230

contribution margin $19845

less fixed cost $7800

net profit $12045

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