Question

In: Accounting

E6.2 The selling price of a service is $25 per hour. Variable costs of providing the...

E6.2 The selling price of a service is $25 per hour. Variable costs of providing the service are $7.00 per

         hour and fixed costs for the business are $3000.

         (a) Calculate the contribution margin per unit.

(b) Calculate the contribution margin ratio.

(c) Prepare a contribution margin statement for the business if it sells 250 hours during a  period.

E6.3 A company has a target profit of $100 000. Its fixed costs are $150 000, variable costs are $12 per unit and the average selling price is $20 per unit.

Calculate:

(a) the number of units to be sold to achieve the target profit.          

(b) the total sales value necessary to achieve the target profit.

P6.1 Unicorn Ltd has provided the following information for the months of January and February:

                                                        January                 February

          Units sold                               25,000                    35,000

          Total costs                            $50,000                   $67,500

          Selling price per unit                $4                           $4

a. Calculate the variable costs per unit and the fixed costs per month.

b. Calculate the value of sales in a year that are needed to break even.

(c) Calculate the value of sales in a year that are needed to generate a profit of $10 000 per month.

P 6.2 Brisbun and Adlayde are two companies selling similar products in a competitive market. While

          their profitability is similar, their cost structure is different. The summary results for each

          company are shown below.

                                                                             Brisbun          Adlayde

            Sales 10,000 @ $20                                  200,000         200,000

            Less variable costs:

                      10,000 @ $10                                100,000

                      10,000 @ $5                                                          50,000

            Less fixed costs                                      75,000           125,000

            Profit ($)                                               $25,000            $25,000

  1. Calculate the contribution per unit and the break-even point in both units and sales value for each company.
  2. Which company has the highest risk? Explain why this is so.
  3. Which company is likely to make the highest return if sales exceed 10 000 units? Explain why this is so.

Q5. A business has fixed costs of $200 000, sells its products for $25 each and has variable costs of $10 each. Draw a CVP graph and show the break-even point in sales value and units.

Q6. Explain what is meant by the overhead allocation problem. Why is it important?

Q7. Explain how the allocation of overhead costs to products/ services differs under absorption costing and

       activity-based costing.  What are the costs and benefits of each method?

E6.6 The following customer profitability analysis has been prepared. Present the information in a more meaningful way.

                                                            Customer A      Customer B      Customer C

Sales                                                    $200,000         $300,000         $400,000

Variable costs                                       $120,000         $180,000         $240,000

Customer-specific marketing,

selling and distribution costs                 $100,000         $ 80,000          $ 80,000

Fixed corporate costs allocated

as 10% of sales                                      $ 20,000          $30,000           $40,000

How does the performance of each customer compare? What steps could management take to improve overall profitability?

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Given the following information: Selling Price (per unit): $10,000 Variable Costs (per unit): $7,000 Fixed Costs:...
Given the following information: Selling Price (per unit): $10,000 Variable Costs (per unit): $7,000 Fixed Costs: $200,000 Required Each of these are separate situations: What is the break-even point in total sales in dollars? How many units need to be sold to make a profit of $20,000? How many units need to be sold to make a profit of $20,000 if fixed costs increase from $200,000 to $250,000? How many units would they need to sell if they wanted to...
Given the following information: Selling Price (per unit): $10,000 Variable Costs (per unit): $7,000 Fixed Costs:...
Given the following information: Selling Price (per unit): $10,000 Variable Costs (per unit): $7,000 Fixed Costs: $200,000 Required Each of these are separate situations: What is the break-even point in total sales in dollars? How many units need to be sold to make a profit of $20,000? How many units need to be sold to make a profit of $20,000 if fixed costs increase from $200,000 to $250,000? How many units would they need to sell if they wanted to...
Xion Co. budgets a selling price of $91 per unit, variable costs of $32 per unit,...
Xion Co. budgets a selling price of $91 per unit, variable costs of $32 per unit, and total fixed costs of $290,000. During June, the company produced and sold 12,800 units and incurred actual variable costs of $371,000 and actual fixed costs of $305,000. Actual sales for June were $1,190,000. Prepare a flexible budget report showing variances between budgeted and actual results. List variable and fixed expenses separately. (Indicate the effect of each variance by selecting for favorable, unfavorable, and...
Sales (in units) 60,000 Selling price per unit $25 Manufacturing costs per unit:   Materials 5   Direct...
Sales (in units) 60,000 Selling price per unit $25 Manufacturing costs per unit:   Materials 5   Direct labor 4   Overhead         Variable 4          Fixed 6     Total $19 Gross margin 6 Selling and admin. Expenses per unit 2 Operating income $4 A company in a foreign market offer to buy and the offer specifies the following data units to be sold 10,000 price per unit $12 The incremental profit should be
Selling price per unit (package of 2 CDs)...................................... $20.00 Variable costs per unit: Direct material............................................................................................................... $4.00...
Selling price per unit (package of 2 CDs)...................................... $20.00 Variable costs per unit: Direct material............................................................................................................... $4.00 Direct labor...................................................................................................................... $5.00 Artist's royalties.............................................................................................................. $3.50 Manufacturing overhead.......................................................................................... $3.00 Selling expenses............................................................................................................ $1.00 Total variable costs per unit............................................................ $16.50 Annual fixed costs: Manufacturing overhead.......................................................................................... $180,000 Selling and administrative....................................................................................... $220,000 Total fixed costs................................................................................ $400,000 Forecasted annual sales volume (120,000 units)......................... $2,400,000 If the company's direct-labor costs do increase by 8%, what selling price per unit of product must it charge to maintain the same contribution margin...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per unit Variable Cost per unit Contribution Margin per unit X $1,248 $468 $780 Y 473 253 220 The sales mix for products X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y combined. Round answer to nearest whole number. units...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and...
Steven Company has fixed costs of $239,080. The unit selling price, variable cost per unit, and contribution margin per unit for the company's two products are provided below. Product Selling Price per unit Variable Cost per unit Contribution Margin per unit X $1,248 $468 $780 Y 473 253 220 The sales mix for products X and Y is 60% and 40% respectively. Determine the break-even point in units of X and Y combined. Round answer to nearest whole number. units
if fixed costs are $728,400, the unit selling price is $42, and the unit variable costs...
if fixed costs are $728,400, the unit selling price is $42, and the unit variable costs are $27, what is the break-even sales (units) if target profits are increased by $330,930? A) 26,498 B) 22,062 C) 48,560 D) 70,622 if the contribution margin ratio for 4 Zsons Company is 30%, sales were $843,000 and fixed costs were $113,295, what was the income from operations? A) 252,900 B) 139,605 C) 158,200 D) 377,650 Period Costs: A) are expensed as costs are...
If fixed costs are $247,000, the unit selling price is $116, and the unit variable costs...
If fixed costs are $247,000, the unit selling price is $116, and the unit variable costs are $73, what are the break-even sales in units (rounded to a whole number)?
Data Selling price per unit $50 Manufacturing costs: Variable per unit produced: Direct materials $11 Direct...
Data Selling price per unit $50 Manufacturing costs: Variable per unit produced: Direct materials $11 Direct labor $6 Variable manufacturing overhead $3 Fixed manufacturing overhead per year $120,000 Selling and administrative expenses: Variable per unit sold $4 Fixed per year $70,000 Year 1 Year 2 Units in beginning inventory 0 Units produced during the year 10,000 6,000 Units sold during the year 8,000 8,000 Enter a formula into each of the cells marked with a ? below Review Problem 1:...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT