Question

In: Accounting

Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit...

Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit was $200 and data for variable and fixed costs were as follows:

Cost Schedule:

Variable Costs:

Direct Material

$28

Direct Labour

$35

Variable Manufacturing Overhead

$17

$80

Fixed Costs:

Manufacturing Overhead

$225,000

Advertising

45,000

Administrative

150,000

$420,000

i)             Compute the number of units sold in 2017, using the equation method.

iv)          Calculate the margin of safety in number of units and sales dollars.

v)           Using the sales units calculated in (i), construct a breakeven chart for Grange Manufacturing Company, clearly showing the breakeven point and the margin of safety in units and dollars and the region representing profits and losses. [Use a scale of 2 cm to represent 1,000 units on the x-axis and 2cm to represent $200,000 on the y-axis].

vi)          The president of Grange Manufacturing is under pressure from stockholders to increase operating income by 8% in 2018. Management expects per unit data and total fixed costs to remain the same in 2018. Compute the number of units that must be sold in 2018 to reach the shareholders’ desired profit level. Is this a realistic goal?

vii)        Assume that Grange Manufacturing sells the same number of units in 2018 as it did in 2017. Assuming unit variable costs and total fixed costs remain unchanged, what would the selling price have to be in order to reach the stockholders’ desired profit level?

Please assist with iv to vii

Solutions

Expert Solution

1 P.U. Amount (6000 Units)
Sales (a) 200 1200000
Direct Material 28 168000
Direct Labour 35 210000
Variable O/H 17 102000
Total Variable Cost (b) 80 480000
Contribution (b/a) 120 720000
Fixed Cost
Manufacturing O/H 225000
Advertising 45000
Admin 150000
Profit 300000
Contribution = 225000+45000+150000+300000 = 720000
Unit = Contribution / Contribution per unit
720000/120 = 6000 Units
(iv) MOS
Break even point = Fixed Cost/Contribution
(420000/120) = 3500 Units
Break even sales value = (3500*200) = 700000
MoS = Actual Sales - Break even sales
(6000- 3500 ) = 2500 Units
MoS = Actual Sales value - Break even sales value
(1200000-700000) = $500000
(vi)
8% of operating profit = (300000*8%) = 24000
Contribution per unit = 120
Extra units to be sold for desired profit = Incremental desired profit/ Contribution
(24000/120) = 200 Units
Total units to be sold in 2018 for achieving 8 % extra operating income = 6000 + 200 = 6200 units
Yes Selling of 200 units extra in a year is realistic goal
(vii) Selling Price, if sell 6000 units and achieved desired profit
P.U. Amount (6000 Units)
Sales (a) 204 1224000 (744000+480000)
Direct Material 28 168000 remain unchanged
Direct Labour 35 210000 remain unchanged
Variable O/H 17 102000 remain unchanged
Total Variable Cost (b) 80 480000 remain unchanged
Contribution required (b/a) 124 744000 required
Fixed Cost
Manufacturing O/H 225000
Advertising 45000
Admin 150000
Profit 324000 (300000*1.08)
Selling Price = $204
Note: Do reverse calculation

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit...
Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit was $200 and data for variable and fixed costs were as follows: Cost Schedule: Variable Costs: Direct Material $28 Direct Labour $35 Variable Manufacturing Overhead $17 $80 Fixed Costs: Manufacturing Overhead $225,000 Advertising 45,000 Administrative 150,000 $420,000 Required: i)             Compute the number of units sold in 2017, using the equation method. ii)           Using the sales units calculated in (i), prepare a contribution margin income statement for...
Grange manufacturing company had net income of $300,000 in 2017 when the selling price per unit...
Grange manufacturing company had net income of $300,000 in 2017 when the selling price per unit was $200 and data for variable and fixed costs were as follows:   Cost Schedule: Variable Costs: Direct Material $28 Direct Labour $35 Variable Manufacturing Overhead $17 Total $80 Fixed Costs: Manufacturing Overhead $225,000 Advertising 45,000 Administrative 150,000 Total $420,000 Required: i) Compute the number of units sold in 2017, using the equation method. ii) Calculate Grange’s break-even point in units and in dollars. iii)...
Crane Company had $290,600 of net income in 2019 when the selling price per unit was...
Crane Company had $290,600 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $94, and the fixed costs were $573,400. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Crane Company is under pressure from stockholders to increase net income by $57,600 in 2020. A. Compute the number of units sold in 2019 B. Compute the number of units that would...
Wildhorse Company had $278,700 of net income in 2019 when the selling price per unit was...
Wildhorse Company had $278,700 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $94, and the fixed costs were $573,300. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Wildhorse Company is under pressure from stockholders to increase net income by $42,600 in 2020. A.)Compute the number of units sold in 2019. B.)Compute the number of units that would have to...
Ivanhoe Company had $177,900 of net income in 2019 when the selling price per unit was...
Ivanhoe Company had $177,900 of net income in 2019 when the selling price per unit was $154, the variable costs per unit were $98, and the fixed costs were $572,500. Management expects per unit data and total fixed costs to remain the same in 2020. The president of Ivanhoe Company is under pressure from stockholders to increase net income by $93,800 in 2020. Compute the number of units sold in 2019. Compute the number of units that would have to...
Blue Spruce Company had $152,600 of net income in 2016 when the selling price per unit...
Blue Spruce Company had $152,600 of net income in 2016 when the selling price per unit was $153, the variable costs per unit were $93, and the fixed costs were $573,300. Management expects per unit data and total fixed costs to remain the same in 2017. The president of Blue Spruce Company is under pressure from stockholders to increase net income by $61,700 in 2017. Assume that Blue Spruce Company sells the same number of units in 2017 as it...
G Force Manufacturing Company had net income of $300,000 in 2017 when the number of units...
G Force Manufacturing Company had net income of $300,000 in 2017 when the number of units produced and sold was 6000 and data for variable and fixed costs were as follows: Cost Schedule Variable Costs:          Direct Material                                           $35                                     Direct Labour                                         $30                                     Variable Manufacturing Overhead            $15 Fixed Costs:               Manufacturing Overhead                                          $232,000                                     Advertising                                                                   33,000                                     Administrative                                                                     155,000 Required: Compute the selling price per unit in 2017, using the equation method. Using the sales price per unit calculated...
E11-14 Naylor Company had $210,000 of net income in 2016 when the selling price per unit...
E11-14 Naylor Company had $210,000 of net income in 2016 when the selling price per unit was $150, the variable costs per unit were $90, and the fixed costs were $570,000.Management expects per unit data and total fixed costs to remain the same in 2017. The president of Naylor Company is under pressure from stockholders to increase net income by $52,000 in 2017. Instructions(a) Compute the number of units sold in 2016. (b) Compute the number of units that would...
G-Force Manufacturing Company had net income of $300,000 in 2017 when the number of units produced...
G-Force Manufacturing Company had net income of $300,000 in 2017 when the number of units produced and sold was 6,000 and data for variable and fixed costs were as follows: Cost Schedule: Variable Costs: Direct Material $35 Direct Labour $30 Variable Manufacturing Overhead $15 Fixed Costs: Manufacturing Overhead $232,000 Advertising 33,000 Administrative 155,000 Required: i) Compute the selling price per unit in 2017, using the equation method. ii) Using the sales price per unit calculated in (i), prepare a contribution...
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price...
In 2017, X Company had the following selling price and per-unit variable cost information: Selling price $172 Variable manufacuting costs 85 Variable selling and administrative costs 22 In 2017, total fixed costs were $643,000. In 2018, there are only two expected changes. Direct material costs are expected to decrease by $8 per unit, and fixed selling and administrative costs are expected to increase by $10,000. What must unit sales be in order for X Company to break even in 2018?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT