Question
In: Accounting
Gibson Company makes a product that sells for $33 per unit. The company pays $23 per...
Gibson Company makes a product that sells for $33 per unit. The company pays $23 per unit for the variable costs of the product and incurs annual fixed costs of $95,000. Gibson expects to sell 22,600 units of product.
Margin of Safety. %
Zachary Corporation, which has three divisions, is preparing its sales budget. Each division expects a different growth rate because economic conditions vary in different regions of the country. The growth expectations per quarter are 5 percent for Cummings Division, 3 percent for Springfield Division, and 7 percent for Douglas Division.
-
Complete the sales budget by filling in the missing amounts.
-
Determine the amount of sales revenue that the company will report on its quarterly pro forma income statements.
Determine Gibson’s margin of safety expressed as a percentage. (Round your answer to 2 decimal places (i.e., .2345 should be entered as 23.45).)
Complete the sales budget by filling in the missing amounts. (Round your final answers to the nearest whole dollar amount.)
|
Determine the amount of sales revenue that the company will report on its quarterly pro forma income statements. (Round intermediate calculations and final answers to the nearest whole dollar amount.)
|
Solutions
Expert Solution
| 1 | |||||
| Selling price per unit | $33 | ||||
| Variable expense per unit | $23 | ||||
| Contribution margin per unit | $10 | ||||
| CM Ratio ($10/$33) | 30.30% | ||||
| Break-even in dollar sales | $313,500 | ||||
| (Fixed expenses/Contribution margin ratio) | |||||
| Margin of safety percentage | 58% | ||||
| (Actual Sales - Break-even sales)/Actual sales | |||||
| [(22,600 x $33) - $960,000]/(22,600 x $33) | |||||
| 2 | |||||
| Division | First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |
| Cummings Division | 110,000 | 115,500 | 121,275 | 127,339 | |
| Springfield Division | 310,000 | 319,300 | 328,879 | 338,745 | |
| Douglas Division | 200,000 | 214,000 | 228,980 | 245,009 | |
| First Quarter | Second Quarter | Third Quarter | Fourth Quarter | ||
| Sales Revenue | 620,000 | 648,800 | 679,134 | 711,093 | |
| Working | |||||
| Second Quarter | Third Quarter | Fourth Quarter | |||
| Division | First quarter x 1.05 | Second quarter x 1.05 | Third quarter x 1.05 | ||
| Cummings Division | First quarter x 1.03 | Second quarter x 1.03 | Third quarter x 1.0 | ||
| Springfield Division | First quarter x 1.07 | Second quarter x 1.07 | Third quarter x 1.07 | ||
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