Question

In: Accounting

Madison Company produces a single product which sells for $40 per unit. Fixed expenses total $9,000...

Madison Company produces a single product which sells for $40 per unit. Fixed expenses total $9,000 per month, and variable expenses are $25 per unit. During the current month, sales, in units, totaled 750 units.

Using the information above, match each of the items listed below with the appropriate amount.

- A. B. C. D. E. F. G. H. I. J. K. L.	Contribution margin per unit.
- A. B. C. D. E. F. G. H. I. J. K. L.	Contribution margin ratio.
- A. B. C. D. E. F. G. H. I. J. K. L.	Break-even point in units.
- A. B. C. D. E. F. G. H. I. J. K. L.	Break-even point in dollars.
- A. B. C. D. E. F. G. H. I. J. K. L.	Total contribution margin at the break-even point.
- A. B. C. D. E. F. G. H. I. J. K. L.	Net income during the current month.
- A. B. C. D. E. F. G. H. I. J. K. L.	Margin of safety during the current month.
- A. B. C. D. E. F. G. H. I. J. K. L.	Margin of safety rate during the current month.
- A. B. C. D. E. F. G. H. I. J. K. L.	Operating leverage during the current month.
- A. B. C. D. E. F. G. H. I. J. K. L.	Sales, in units, needed for a target profit of $4,500.
- A. B. C. D. E. F. G. H. I. J. K. L.	Sales, in dollars, needed for a target profit of $3,750.
- A. B. C. D. E. F. G. H. I. J. K. L.	If sales next month increase by 25%, what will be the net income?

Expert Solution

(A) Contribution Margin pu:-

SP – VC = 40 – 25 = $ 15

(B) Contribution Margin Ratio:-

Contribution/Sales

= 15/40 = 37.5%

(C) BEP(in units):-

Fixed cost/contribution pu

= 9000/15 = 600 units

(D)BEP (in $) :-

Fixed cost/contribution margin ratio

= 9000/37.5% = $ 24000

(E)Total contribution margin at BEP :-

At BEP contribution = Fixed cost

= $ 9000

(F)Net Income durng current month :-

Sale – VC – FC

(750 * 40) – (750 * 25) – 9000

= $2250

(G) Margin of Safety :-

In units=Actual Sale – BEP

= 750 – 600 = 150 units

(H) Margin of Safety rate:-

In %age = (Actual Sale – BEP)/Actual Sale

= 150/750 = 20%

(I) Operating Leverage :-

Contribution margin/Operating Income

= ($ 15 * 750 units)/2250 = 5

(J)Target Profit = 4500

Sale – VC – FC = Profit

Let “X” be the units sold

(X * 15) – 9000 = 4500

X = 900 units

(K) Target Profit = 3750

(X * 15) – 9000 = 3750

X = 850 units

In $ = 850*40 = $ 34000

(L) In next month, sale increase by 25%

Revised contribution = (750 units * 125%) * 15 = 14062.5

Income = 14062.5 – 9000 = 5062.5

ekkarill92 answered 1 year ago

Madison Company produces a single product which sells for $30 per unit. Fixed expenses total $13,500...

Madison Company produces a single product which sells for $30 per unit. Fixed expenses total $13,500 per month, and variable expenses are $12 per unit. During the current month, sales, in units, totaled 900 units. Using the information above, match each of the items listed below with the appropriate amount. - Contribution margin per unit. - Contribution margin ratio. - Break-even point in units. - Break-even point in dollars. ...

Madison Company produces a single product which sells for $80 per unit. Fixed expenses total $18,000...

Madison Company produces a single product which sells for $80 per unit. Fixed expenses total $18,000 per month, and variable expenses are $44 per unit. During the current month, sales, in units, totaled 700 units. Using the information above, match each of the items listed below with the appropriate amount. 1.Contribution margin per unit. 2.Contribution margin ratio 3.Break-even point in units. 4.Break-even point in dollars. 5.Total contribution margin at the break-even point. 6.Net income during the current month. 7.Margin of...

- XYZ Company sells its only product for $40 per unit. Its total fixed costs are...

- XYZ Company sells its only product for $40 per unit. Its total fixed costs are $180,000 per annum. Its CM ratio is 20%. XYZ plans to sell 16,000 units this year. Required: 1. Calculate CM per unit and the variable cost per unit. 2. Calculate break-even point in unit sales and in dollar sales? 3. Calculate the unit sales and dollar sales required to achieve a target profit of $60,000 per year? 4. Assume that the company is able...

Sandler Company sells a single product. The product has a selling price of $40 per unit...

Sandler Company sells a single product. The product has a selling price of $40 per unit and variable expenses of $15 per unit. The company's fixed expenses total $30,000 per year. The company's break-even point in terms of total dollar sales is: Select one: a. $100,000. b. $80,000. c. $60,000. d. $48,000

A company that produces and sells a single product for $22 per unit has provided the...

A company that produces and sells a single product for $22 per unit has provided the following volume and average cost data for two accounting period: Level of activity (unit) ---------------------------- ---------------- 1,000 2,000 Direct materials ------------------------- ------------------------ $4.00 $4.00 Direct Labor----------------------------------------------------- $3.00 $3.00 Manufacturing overhead-------------------------------------------- $3.50 $2.50 General, selling, and administrative expenses-------------- $1.00 $0.50 1. The best estimate of the total contribution margin when 4,300 units are sold is: $64,500 $45,150 $58,050 $51,600 2. The best estimate of the...

Q1 a) M Ltd manufactures a single product which it sells for K9 per unit. Fixed...

Q1 a) M Ltd manufactures a single product which it sells for K9 per unit. Fixed costs are K54, 000 per month and the product has a variable cost of K6 per unit in a period when actual sales were K180, 000. Calculate M Ltd´s marginal of safety in units. b). For forthcoming year, G plc,s variable costs are budgeted to be 60 percent of the sales value and fixed costs are budgeted to be 10 percent of sales value....

Towing Company manufactures and sells a single product for $40 per unit. Variable costs are $30...

Towing Company manufactures and sells a single product for $40 per unit. Variable costs are $30 per unit and fixed costs total $168,000. During 2019, the company sold 26,500 units of this product to customers. In order to improve profitability, the president of Towing Company believes the following changes should be made in 2020: 1. decrease the selling price of the product by 10% 2. automate a portion of the production process which will reduce variable costs by 5% per...

A product sells for $5 per unit. The variable cost of production is $3 per unit. Total fixed...

A product sells for $5 per unit. The variable cost of production is $3 per unit. Total fixed costs per year are $1000, including depreciation expense of $200. What is the cash flow breakeven point in units and in dollars? A. 400 units and $2000. B. 267 units and $1333. C. 500 units and $2500. D. 333 units and $1665.

Blanchard Company manufactures a single product that sells for $195 per unit and whose total variable...

Blanchard Company manufactures a single product that sells for $195 per unit and whose total variable costs are $156 per unit. The company’s annual fixed costs are $510,900. (a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. Choose Numerator: / Choose Denominator: = Contribution Margin Ratio / = Contribution margin ratio (c) Compute the company's break-even point in units. Choose Numerator: / Choose Denominator: = Break-Even Units / = Break-even units (d)...

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable...

Blanchard Company manufactures a single product that sells for $180 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $842,400. Management targets an annual pretax income of $1,350,000. Assume that fixed costs remain at $842,400. (1) Compute the unit sales to earn the target income. Choose Numerator: / Choose Denominator: = Units to Achieve Target / = Units to achieve target (2) Compute the dollar sales to earn the target income. Choose...