Question

In: Accounting

1. The following costs result from the production and sale of 4,450 drum sets manufactured by...

1. The following costs result from the production and sale of 4,450 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $295 each. The company has a 30% income tax rate.

Variable production costs
Plastic for casing $ 115,700
Wages of assembly workers 404,950
Drum stands 155,750
Variable selling costs
Sales commissions 106,800
Fixed manufacturing costs
Taxes on factory 14,500
Factory maintenance 29,000
Factory machinery depreciation 89,000
Fixed selling and administrative costs
Lease of equipment for sales staff 29,000
Accounting staff salaries 79,000
Administrative management salaries 159,000

a. Prepare a contribution margin income statement for the company.

b. Compute its contribution margin per unit and its contribution margin ratio.

2. Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $350 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $315,000, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $245 per 100 yards of XT rope.

a. Estimate Product XT’s break-even point in terms of sales units and sales dollars. (1 unit = 100 yards) (Do not round intermediate calculations.) 2.

b. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.

Solutions

Expert Solution

1.

A.
Sales 1312750
Less: Variable Cost
Plastic for casing 1,15,700
Wages of assembly workers 4,04,950
Drum stands 1,55,750
Less: Variable selling costs
Sales commissions 1,06,800 7,83,200
Equals: Contribution Margin 5,29,550
Less: Fixed manufacturing costs
Taxes on factory 14,500
Factory maintenance 29,000
Factory machinery depreciation 89,000
Less: Fixed selling and administrative costs
Lease of equipment for sales staff 29,000
Accounting staff salaries 79,000
Administrative management salaries 1,59,000 3,99,500
Net Income 1,30,050
B.
Selling Price Per Unit 295
Less: Variable Cost Per Unit 176 783200/4450
Contribution Margin Per Unit 119
Contribution Margin Ratio 40.34% 529550/1312750*100

2.

A.
Breakeven point in Units 3000 315000/(350-245)
Breakeven point in Sales 1050000 315000/[(350-245)/350]
B.
Sales 1050000 3000*350
Less: Variable Costs 735000 3000*245
Contribution 315000
Less: Fixed Costs 315000
Net Income 0

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

The following costs result from the production and sale of 4,300 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,300 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $280 each. The company has a 35% income tax rate.    Variable production costs Plastic for casing $ 98,900 Wages of assembly workers 378,400 Drum stands 137,600 Variable selling costs Sales commissions 90,300 Fixed manufacturing costs Taxes on factory 13,000 Factory maintenance 26,000 Factory machinery depreciation 86,000 Fixed selling and...
The following costs result from the production and sale of 4,050 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,050 drum sets manufactured by Tight Drums Company for the year ended December 31, 2019. The drum sets sell for $255 each. The company has a 30% income tax rate. Variable production costs Plastic for casing $ 72,900 Wages of assembly workers 336,150 Drum stands 109,350 Variable selling costs Sales commissions 64,800 Fixed manufacturing costs Taxes on factory 10,500 Factory maintenance 21,000 Factory machinery depreciation 81,000 Fixed selling and administrative...
The following costs result from the production and sale of 4,950 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,950 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $345 each. The company has a 40% income tax rate.                 Variable production costs            Plastic for casing   $   178,200      Wages of assembly workers      499,950      Drum stands      222,750      Variable selling costs            Sales commissions      168,300     ...
The following costs result from the production and sale of 4,300 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,300 drum sets manufactured by Tight Drums Company for the year ended December 31, 2019. The drum sets sell for $280 each. The company has a 35% income tax rate. Variable production costs Plastic for casing $ 98,900 Wages of assembly workers 378,400 Drum stands 137,600 Variable selling costs Sales commissions 90,300 Fixed manufacturing costs Taxes on factory 13,000 Factory maintenance 26,000 Factory machinery depreciation 86,000 Fixed selling and administrative...
The following costs result from the production and sale of 4,850 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,850 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $335 each. The company has a 30% income tax rate.    Variable production costs Plastic for casing $ 164,900 Wages of assembly workers 480,150 Drum stands 208,550 Variable selling costs Sales commissions 155,200 Fixed manufacturing costs Taxes on factory 6,500 Factory maintenance 13,000 Factory machinery depreciation 73,000 Fixed selling and...
The following costs result from the production and sale of 4,600 drum sets manufactured by Tight...
The following costs result from the production and sale of 4,600 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $310 each. The company has a 25% income tax rate.    Variable production costs Plastic for casing $ 133,400 Wages of assembly workers 432,400 Drum stands 174,800 Variable selling costs Sales commissions 124,200 Fixed manufacturing costs Taxes on factory 9,000 Factory maintenance 18,000 Factory machinery depreciation 78,000 Fixed selling and...
Listed here are the total costs associated with the production of 1,000 drum sets manufactured by...
Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $508 each.    Costs 1. Plastic for casing—$20,000 2. Wages of assembly workers—$88,000 3. Property taxes on factory—$7,000 4. Accounting staff salaries—$37,000 5. Drum stands (1,000 stands purchased)—$41,000 6. Rent cost of equipment for sales staff—$12,000 7. Upper management salaries—$180,000 8. Annual flat fee for factory maintenance service—$18,000 9. Sales commissions—$26 per unit 10. Machinery depreciation, straight-line—$37,000 Required:...
Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $456 each.
Problem 01-1A Cost computation, classification, and analysis LO C2, C3Listed here are the total costs associated with the production of 1,000 drum sets manufactured by TrueBeat. The drum sets sell for $456 each.  Costs1.Plastic for casing—$19,0002.Wages of assembly workers—$89,0003.Property taxes on factory—$7,0004.Accounting staff salaries—$30,0005.Drum stands (1,000 stands purchased)—$31,0006.Rent cost of equipment for sales staff—$24,0007.Upper management salaries—$155,0008.Annual flat fee for factory maintenance service—$13,0009.Sales commissions—$20 per unit10.Machinery depreciation, straight-line—$38,000Problem 01-1A Part 1Required:1. Classify each cost and its amount as (a) either variable or...
The following is a list of costs that were incurred in the production and sale of...
The following is a list of costs that were incurred in the production and sale of large commercial airplanes: Classify each cost as either a product cost or a period cost. Indicate whether each product cost is a direct materials cost, a direct labor cost, or a factory overhead cost. Indicate whether each period cost is a selling expense or an administrative expense. p. Metal used for producing the airplane body q. Annual fee to a celebrity to promote the...
5-10 Preparing a production budget (CMA adapted) (LO 3) Rossano, Inc., makes and sells drum sets....
5-10 Preparing a production budget (CMA adapted) (LO 3) Rossano, Inc., makes and sells drum sets. Nick Ross, controller, is responsible for preparing the master budget. The sales manager has given Nick the following sales forecast for the coming months. April May June July Forecasted unit sales 12,000 15,000 10,000 11,000 Rossano expects to have 6,000 drum sets in ending inventory on March 31. The company’s policy is to carry 30% of the following month’s projected sales in ending inventory....
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT