Question

In: Accounting

2.) Harry Company sells 27,000 units at $34 per unit. Variable costs are $21.08 per unit,...

2.) Harry Company sells 27,000 units at $34 per unit. Variable costs are $21.08 per unit, and fixed costs are $160,500.

Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

a. Contribution margin ratio (Enter as a whole number.) %
b. Unit contribution margin (Round to the nearest cent.) $ per unit
c. Income from operations $

3.) Megan Company has fixed costs of $505,920. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products follow:

Product Selling Price Variable Cost per Unit Contribution Margin per Unit
QQ $390 $260 $130
ZZ 530 380 150

The sales mix for Products QQ and ZZ is 70% and 30%, respectively. Determine the break-even point in units of QQ and ZZ. If required, round your answers to the nearest whole number.

a. Product QQ  units

b. Product ZZ  units

4.) Tucker Co. reports the following data:

Sales $416,600
Variable costs 270,800
Contribution margin $145,800
Fixed costs 117,800
Income from operations $28,000

Determine Tucker Company's operating leverage. Round your answer to one decimal place.

Solutions

Expert Solution

Q2.
Selling price 34
Less: VC per unit 21.08
Contribution margin per unit 12.92
Divide: Selling price 34
Contribution margin ratio 38.00%
Contribution margin ratio 38%
Unit contribution 12.92
Income from Operations:
Sales (27000*34) 918000
Less: Variable cost (21.08*27000) 569160
Contribution margin 348840
Less: Fixed cost 160500
Net Income from Operations 188340
Q3.
Weighted unit contribution = 130*70% + 150*30% = $ 136 per unit
Break even units = Fixed cost / Weighted unit contribution
505,920 / 136 = 3720 units
Break even units of QQ = 3720*70% = 2604 units
Break even units of ZZ = 3720*30% = 1116 units
Q4.
Operating leverage:
Contribution margin 145800
Divide: Income from Operations 28000
Operating leverage: 5.2

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