In: Accounting
Mersey Company's industrial photofinishing division, Vale, incurred the following costs and expenses in the last period.
Variable | Fixed | ||
Direct materials | $228,000 | ||
Direct labour | 171,000 | ||
Factory overhead | 79,800 | $47,880 | |
General, selling, and administrative |
34,200 |
54,720 |
|
Totals |
$513,000 |
$102,600 |
During the period, Vale produced 342,000 units of industrial photo prints, which were sold for $2 each. Mersey's investment in Vale was $570,000 and $798,000 at the beginning and ending of the year, respectively. Mersey's weighted average cost of capital is 15%.
Determine Vale's return on investment for the year. (Round answer to 0 decimal places.): ______%
Calculate Vale's residual income (loss) for the year. (If answer is negative, please use parenthesis. Round answer to 0 decimal places.): $______
How many industrial photo print units did Vale have to sell during the year to break even? (Round answer to 0 decimal places.): ______units
What was Vale's contribution margin for the year? (Round answer to 0 decimal places.): $______
1) vale return of Investment = 15%
= Investment made during the year * 15%
= 912000 * 15%
= $136800
Total Sales= opening Investment + Investment During the year - Closing Investment |
684000 = 570000 + Investment during the year -798000 |
Investment During the year =684000 + 798000 - 570000 = 912000 |
2)
Statement of contribution | |
Sale ( 342000 Units * $2 per unit) | 684000 |
Less: Variable cost | |
Direct Material | -228000 |
Direct labour | -171000 |
Factory Overhead | -79800 |
General selling and admin | -34200 |
Contribution margin | 171000 |
Less : Fixed Cost | 102600 |
operating Profit | 68400 |
Residual Income = Operating Profit - return on investment
= 68400 - 136800
= $ 68400 (Loss)
3)
Statement of contribution | |
Sale ( 342000 Units * $2 per unit) | 684000 |
Less: Variable cost | |
Direct Material | -228000 |
Direct labour | -171000 |
Factory Overhead | -79800 |
General selling and admin | -34200 |
Contribution margin | 171000 |
Contribution margin per unit | 0.5 |
Breakeven point in units = Total Fixed cost / contribution margin per unit
= 102600 / 0.5
= 205200 units
4)
Statement of contribution | |
Sale ( 342000 Units * $2 per unit) | 684000 |
Less: Variable cost | |
Direct Material | -228000 |
Direct labour | -171000 |
Factory Overhead | -79800 |
General selling and admin | -34200 |
Contribution margin | 171000 |
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