Question

In: Finance

Niko's manufacturing Income Statement is presented in the next table ( units sold 750,000) Per Unit...

Niko's manufacturing Income Statement is presented in the next table ( units sold 750,000)

Per Unit Total
Sales $48.00 $36,000,000

Variable Costs
Direct Materials $14.00 $10,500,000.00
Direct Labor $10.00 $7,500,000.00
Factor Overhead $3.50 $2,625,000.00
Selling $1.50 $1,125,000.00
Total Variable Cost $21,750,000.00

Fixed Cost
Overhead $5.27 $3,950,000.00
Selling $4.67 $3,500,000.00
Administrative $6.53 $4,900,000.00

Total Fixed Costs $12,350,000.00
Pre Tax Income $1,900,000.00

Required

Calculate Contribution Margin per unit

Calculate Contribution Margin Ratio

Calculate Break Even Point in units

Calculate Break Even Point in $sales

What is the actual % margin of safety in units?

What is the actual % margin of safety in $sales?

Calculate actual Degree of Operating Leverage

If Niko’s pretax income goal is 9 million, how much units the company needs to sale

If Niko’s pretax income goal is 9 million, how much will be the $sales

A new technology will increase the operations’ efficiency. This new technique will reduce the direct material cost per unit by $1.00 and the direct labor cost by $.50, but will increase the fixed overhead cost by 1.5 million. The company is considering the implantation of this new technology.

Using this new data:

Calculate Contribution Margin per unit

Calculate Contribution Margin Ratio

Calculate Break Even Point in units

Calculate Break Even Point in $sales

Calculate Degree of Operating Leverage (with sales of 750,000 units)

Is the new technology a good decision?

How you explain the change in degree of operating leverage?

Solutions

Expert Solution

Selling Price per unit = $48.00
Variable Cost per unit = $29.00
Fixed Costs = $12,350,000

Contribution Margin per unit = Selling Price per unit - Variable Cost per unit
Contribution Margin per unit = $48.00 - $29.00
Contribution Margin per unit = $19.00

Contribution Margin Ratio = Contribution Margin per unit / Selling Price per unit
Contribution Margin Ratio = $19.00 / $48.00
Contribution Margin Ratio = 39.58%

Breakeven Point in units = Fixed Costs / Contribution Margin per unit
Breakeven Point in units = $12,350,000 / $19.00
Breakeven Point in units = 650,000

Breakeven Point in sales = Breakeven Point in units * Selling Price per unit
Breakeven Point in sales = 650,000 * $48.00
Breakeven Point in sales = $31,200,000

Margin of Safety in units = Sales in units - Breakeven Point in units
Margin of Safety in units = 750,000 - 650,000
Margin of Safety in units = 100,000

Margin of Safety in sales = Sales in units - Breakeven Point in units
Margin of Safety in sales = $36,000,000 - $31,200,000
Margin of Safety in sales = $4,800,000

Degree of Operating Leverage = (Sales - Variable Costs) / Pretax Income
Degree of Operating Leverage = ($36,000,000 - $21,750,000) / $1,900,000
Degree of Operating Leverage = 7.50

jeff jeffy answered 1 year ago
Next > < Previous

Related Solutions

- Income Statement Data for 20XX: Units produced and sold = 420 Sales ($80 per unit...
- Income Statement Data for 20XX: Units produced and sold = 420 Sales ($80 per unit selling price) = $33600 Cost of goods sold ($30 per unit, all variable costs) = $12600 Labor = $0 (Mr. and Mr. Lee were the only ones working and did not pay themselves) Advertising fees =$2000 Bank fees = $150 Phone/internet = $1200 Shipping ($3 per unit) = $1260 Utilities = $900 Office supplies = $800 Interest expense on note payable = $350 Depreciation...
Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income...
Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income Werner Company produces and sells disposable foil baking pans to retailers for $2.50 per pan. The variable cost per pan is as follows: Direct materials $0.30 Direct labor 0.57 Variable factory overhead 0.74 Variable selling expense 0.17 Fixed manufacturing cost totals $136,541 per year. Administrative cost (all fixed) totals $18,619. Required: 1. Compute the number of pans that must be sold for Werner to...
Table 1 Income Statement Data Units Sold 150,000 Unit Cost $40.00 Price $90.00 Advertising $1,200,000 Consumer...
Table 1 Income Statement Data Units Sold 150,000 Unit Cost $40.00 Price $90.00 Advertising $1,200,000 Consumer Promotion $1,600,000 Personal Selling 5 salesperson @ $80,000 each Dealer Promotions $1,300,000 Product Development $900,000 If unit cost is $40, what is the return on sales (%) if 2 sales people are added and sales increase by 20,000 units (assume other information in Table 1 stays the same)? [img: “Table 1 Income Statement Data.jpg”]
C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per...
C. Prepare a budgeted income statement, assuming 600 units to be produced and sold, a per unit selling price of $85, an income tax rate of 28% and the following information. Cost of goods sold of $35 per unit Labor = $400/month One part-time employee will be hired to take care of packaging and shipping. This employee will be paid $10 per hour. He or she is estimated to work 40 hours total per month. Advertising fees = $3,000 Bank...
This year Cairo Company sold 30,000 units of its only product for $19.00 per unit. Manufacturing...
This year Cairo Company sold 30,000 units of its only product for $19.00 per unit. Manufacturing and selling the product required $115,000 of fixed manufacturing costs and $175,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.50   Direct labor (paid on the basis of completed units) 2.50   Variable overhead costs 0.35   Variable selling and administrative costs 0.15 Next year the company will use new material, which will reduce material costs by 60%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing...
This year Cairo Company sold 29,000 units of its only product for $19.20 per unit. Manufacturing and selling the product required $114,000 of fixed manufacturing costs and $174,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 3.40   Direct labor (paid on the basis of completed units) 2.40   Variable overhead costs 0.34   Variable selling and administrative costs 0.14 Next year the company will use new material, which will reduce material costs by 70%...
This year Cairo Company sold 43,000 units of its only product for $17.60 per unit. Manufacturing...
This year Cairo Company sold 43,000 units of its only product for $17.60 per unit. Manufacturing and selling the product required $128,000 of fixed manufacturing costs and $188,000 of fixed selling and administrative costs. Its per unit variable costs follow.           Material $ 4.80   Direct labor (paid on the basis of completed units) 3.80   Variable overhead costs 0.48   Variable selling and administrative costs 0.28 Next year the company will use new material, which will reduce material costs by 50%...
This year Burchard Company sold 40,000 units of its only product for $17.00 per unit. Manufacturing...
This year Burchard Company sold 40,000 units of its only product for $17.00 per unit. Manufacturing and selling the product required $125,000 of fixed manufacturing costs and $185,000 of fixed selling and administrative costs. Its per unit variable costs follow. Material $ 4.50 Direct labor (paid on the basis of completed units) 3.50 Variable overhead costs 0.45 Variable selling and administrative costs 0.25 Next year the company will use new material, which will reduce material costs by 50% and direct...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT