Question

In: Accounting

Zebra Company manufactures custom-designed skins (covers) for iPods® and other portable MP3 devices. Variable costs are...

Zebra Company manufactures custom-designed skins (covers) for iPods® and other portable MP3 devices. Variable costs are $12.00 per custom skin, the price is $20, and fixed costs are $144,800. Required:

1.What is the contribution margin for one custom skin? Round your answer to the nearest cent. $ per custom skin

2. How many custom skins must Zebra Company sell to break even? custom skins

3. If Zebra Company sells 19,000 custom skins, what is the operating income? $

4. Calculate the margin of safety in units and in sales revenue if 19,000 custom skins are sold. Margin of safety in units units Margin of safety in sales revenue $

Solutions

Expert Solution

Variable cost = $12

Sale price = $20

Fixed cost = $144,800

1.

Contribution margin for one custom skin = Sales price - Variable cost

= 20-12

= 8 per custom skin

2.

Break even sales in units = Fixed costs/Contribution margin

= 144,800/8

= 18,100 custom skins

3.

Income Statement
Sales (19,000 x 20) 380,000
Variable cost (19,000 x 12) 228,000
Contribution margin $152,000
Fixed costs -144,800
Net operating income $7,200

the operating income is $7,200, if Zebra Company sells 19,000 custom skins

4.

Contribution margin for one custom skin = Sales price - Variable cost

= 20-12

= 8 per custom skin

Contribution margin ratio = Contribution margin for one custom skin/ Sales price

= 8/20

= 40%

Break even sales in units = Fixed costs/Contribution margin

= 144,800/8

= 18,100 custom skins

Break even sales in dollars = Fixed costs/Contribution margin ratio

= 144,800/40%

= $362,000

Margin of safety in units = Actual units - Break even units

=19,000- 18,100

= 900 units

Actual sales = Sales units x Sales price per skin

= 19,000 x 20

= 380,000

Margin of safety in dollars = Actual sales - Break even sales in dollars

= 380,000-362,000

= $18,000

Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.

Thanks!!!


Related Solutions

Campus Coolers manufactures portable coolers with college logos. During 2018, the company had the following costs:...
Campus Coolers manufactures portable coolers with college logos. During 2018, the company had the following costs: Direct materials used $ 32,000 Factory rent 1,000 Shipping costs to retail store 600 Equipment depreciation - factory 2,000 Equipment depreciation - office 750 Advertising 2,500 Indirect labor 1,000 Administrative expenses 1,500 Direct labor 18,000 Sales commissions 3,000 3,000 units produced were in 2018. What is the product cost per unit? (Show calculations for partial credit.)
Roman Sculpture Co. manufactures custom-designed garden accents and distributes their product internationally. The company used prior...
Roman Sculpture Co. manufactures custom-designed garden accents and distributes their product internationally. The company used prior year data to forecast expected costs and expenses. They anticipated 52,560 machine hours and estimated direct labour cost of $964,000. At the end of the year, Roman Sculpture Co. had actually used 51,000 machine hours. The costs incurred were: • Manufacturing plant and equipment depreciation: $408,000 • Plant property taxes: $22,000 • Direct labour: $889,000 • Materials (10% indirect): $400,000 • Salaries & Wages...
Discuss the classification of direct and indirect, fixed and variable costs for a company that manufactures...
Discuss the classification of direct and indirect, fixed and variable costs for a company that manufactures or provides services in the same sector as your selected final project company. Identify two direct cost and two indirect costs that would be material amounts of the total COGM, and indicate whether these would be fixed or variable and why you consider them fixed or variable.
A company manufactures telephones. The company is currently operating at full capacity and variable manufacturing costs...
A company manufactures telephones. The company is currently operating at full capacity and variable manufacturing costs are charged to produce at the rate of 25% of direct labour cost. Consider the following information: Direct Materials cost per unit equals to 30€ Direct Labour cost per unit equals to 10€ Normal Production is 50.000 units per year The 30.000€ of Fixed Manufacturing Overheads cannot be eliminated in case the production stops and will have to be absorbed by other products. A...
Gelbart Company manufactures gas grills. Fixed costs amount to $25,428,000 per year. Variable costs per gas...
Gelbart Company manufactures gas grills. Fixed costs amount to $25,428,000 per year. Variable costs per gas grill are $350, and the average price per gas grill is $1,000. 1. How many gas grills must Gelbart Company sell to break even? ___ gas grills 2. If Gelbart Company sells 42,235 gas grills in a year, what is the operating income? $__ 3. If Gelbart Company’s variable costs increase to $370 per grill while the price and fixed costs remain unchanged, what...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:     Product     A      B      C Selling price   $   180         $   270         $   240      Variable expenses:                                    Direct materials      24            72            32      Other variable expenses      102            90  ...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow:    Product A B C   Selling price $ 240 $ 320 $ 300   Variable expenses:     Direct materials 18 72 27     Other variable expenses 174 152 228   Total variable expenses 192 224 255   Contribution margin $ 48 $ 96 $ 45   Contribution margin ratio 20 % 30 % 15 %    The same raw material is used...
Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated...
Glascro Company manufactures skis. The management accountant wants to calculate the fixed and variable costs associated with the leasing of machinery. Data for the past four months were collected as follows: Month Lease cost Machine hours April $15,000    800 May 10,000    600 June 12,000    770 July 16,000 1,000 Using the high-low method, calculate the fixed cost of leasing. a.$1,500 b.$2,500 c.$1,000 d.$2,000
Outdoors Company manufactures sleeping bags that sell for P30 each. The variable standard costs of production...
Outdoors Company manufactures sleeping bags that sell for P30 each. The variable standard costs of production are P19.50. Budgeted fixed manufacturing overhead is P100,000, and budgeted production is 10,000 sleeping bags. The company actually manufactured 12,500 bags, of which 11,000 were sold. There were no variances during the year except for the fixed-overhead volume variance. Variable selling and administrative costs are P0.50 per sleeping bag sold; fixed selling and administrative costs are P5,000. Required: Calculate the standard product cost per...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution...
Barlow Company manufactures three products: A, B, and C. The selling price, variable costs, and contribution margin for one unit of each product follow: Product A B C Selling price $ 240 $ 360 $ 320 Variable expenses: Direct materials 21 63 28 Other variable expenses 147 153 212 Total variable expenses 168 216 240 Contribution margin $ 72 $ 144 $ 80 Contribution margin ratio 30 % 40 % 25 % The same raw material is used in all...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT