Question

Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 48,000 units of each product. Sales and costs for each product follow.

	Product T				Product O
Sales		$	825,600			$	825,600
Variable costs			577,920				165,120
Contribution margin			247,680				660,480
Fixed costs			113,680				526,480
Profit before taxes			134,000				134,000
Income taxes (32% rate)			42,880				42,880
Net profit		$	91,120			$	91,120

1.

value:
10.00 points

Required information

Required:
1.	Compute the break-even point in dollar sales for each product. (Round your contribution margin ratio to 1 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Omit the "$" sign in your response.)

  

Product T	$
Product O	$

References

WorksheetLearning Objective: 22-A1 Compute the contribution margin and describe what it reveals about a company’s cost structure.Learning Objective: 22-P4 Compute the break-even point for a LP22 multiproduct company

Difficulty: 3 HardLearning Objective: 22-C2 Describe several applications of costvolume- profit analysis.

Check my work

2.

value:
10.00 points

Required information

2.

Assume that the company expects sales of each product to decline to 31,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement as just shown with columns for each of the two products (assume a 32% tax rate). Also, assume that any loss before taxes yields a 32% tax savings. (Round your contribution margin ratio to 1 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Input all amounts as positive values except losses and tax savings on losses, which should be indicated by a minus sign. Omit the "$" sign in your response.)

   

LETTER CO. Forecasted Contribution Margin Income Statement
	Product T	Product O
(Click to select)Factory maintenanceTaxes on factorySales commissionsOffice equipment leaseSales	$	$
(Click to select)Taxes on factoryOffice equipment leaseVariable costsRent on factorySales comissions
(Click to select)Contribution marginGross profit
(Click to select)Sales comissionsOffice equipment leaseRent on factoryFixed costsFactory maintenance
(Click to select)Income before taxesSales comissionsOffice equipment leaseTaxes on factoryRent on factory
(Click to select)Income taxesRent on factoryTaxes on factoryOffice equipment leaseSales comissions
Net income/loss	$	$

References

WorksheetLearning Objective: 22-A1 Compute the contribution margin and describe what it reveals about a company’s cost structure.Learning Objective: 22-P4 Compute the break-even point for a LP22 multiproduct company

Difficulty: 3 HardLearning Objective: 22-C2 Describe several applications of costvolume- profit analysis.

Check my work

3.

value:
10.00 points

Required information

3.

Assume that the company expects sales of each product to increase to 62,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 32% tax rate). (Round your contribution margin ratio to 1 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Input all amounts as positive values except losses and tax savings on losses, which should be indicated by a minus sign. Omit the "$" sign in your response.)

  

LETTER CO. Forecasted Contribution Margin Income Statement
	Product T	Product O
(Click to select)Rent on factoryTaxes on factorySalesSales comissionsOffice equipment lease	$	$
(Click to select)Office equipment leaseTaxes on factoryVariable costsFactory maintenanceRent on factory
(Click to select)Contribution marginGross profit
(Click to select)Taxes on factoryFixed costsOffice equipment leaseFactory maintenanceRent on factory
(Click to select)Income before taxesSales commissionsTaxes on factoryFactory maintenanceRent on factory
(Click to select)Factory maintenanceSales comissionsOffice equipment leaseIncome taxesTaxes on factory
(Click to select)Net incomeNet loss	$	$

Answer 1