Question
In: Accounting
E6-11 Calculating Target Profit, Margin of Safety, Degree of Operating Leverage [LO 6-2, 6-3, 6-4, 6-5]...
E6-11 Calculating Target Profit, Margin of Safety, Degree of Operating Leverage [LO 6-2, 6-3, 6-4, 6-5]
Dana’s Ribbon World makes award rosettes. Following is
information about the company:
| Variable cost per rosette | $ | 2.40 | ||||||||||||||||||||
| Sales price per rosette | 5.00 | |||||||||||||||||||||
| Total fixed costs per month | 3900.00 | |||||||||||||||||||||
Required: 1. Suppose Dana’s would like to generate a profit of $1,060. Determine how many rosettes it must sell to achieve this target profit. (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)
|
||||||||||||||||||||||
3. Calculate Dana’s degree of operating leverage
if it sells 1,700 rosettes. (Round your intermediate
calculations to 2 decimal places and final answer to 4 decimal
places.)
|
4. Using the degree of operating leverage,
calculate the change in Dana’s profit if unit sales drop to 1,275
units. Confirm this by preparing a new contribution margin income
statement. (Round your intermediate calculations to 4
decimal places and final answer to 2 decimal places. (i.e. .1234
should be entered as 12.34%.))
|
|
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Solutions
ekkarill92 answered 1 year agoRelated Solutions
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E6-22 Computing Target Profit, Preparing Contribution Margin
Income Statement, Computing Margin of Safety [LO 6-2, 6-3]
Erin Shelton, Inc., wants to earn a target profit of $820,000
this year. The company’s fixed costs are expected to be $1,040,000
and its variable costs are expected to be 50 percent of sales. Erin
Shelton, Inc., earned $720,000 in profit last year.
Required:
1. Calculate break-even sales for Erin Shelton, Inc.
2. Prepare a contribution margin income statement
on the basis break-even...
E6-22 Computing Target Profit, Preparing Contribution Margin Income Statement, Computing Margin of Safety [LO 6-2, 6-3]...
E6-22 Computing Target Profit, Preparing Contribution Margin
Income Statement, Computing Margin of Safety [LO 6-2, 6-3]
Erin Shelton, Inc., wants to earn a target profit of $880,000
this year. The company’s fixed costs are expected to be $1,160,000
and its variable costs are expected to be 60 percent of sales. Erin
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Required:
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Required:
1. Complete the following table. (Round your "Cost
per Unit" answers to 2 decimal places.)
Number of Canoes Produced and Sold
470
560
720
Total costs
Variable Costs
$70,030
Fixed Costs
153,220
Total Costs
$223,250
$0
$0
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total...
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Sandy Bank, Inc., makes one model of wooden canoe. Partial
information for it follows:
Required:
1. Complete the following table. (Round your "Cost
per Unit" answers to 2 decimal places.)
Number of Canoes Produced and Sold
420
610
730
Total costs
Variable Costs
$61,740
Fixed Costs
142,380
Total Costs
$204,120
Cost per Unit
Variable Cost per Unit
Fixed Cost per Unit
Total Cost per...
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information for it follows:
Required:
1. Complete the following table. (Round your "Cost
per Unit" answers to 2 decimal places.)
Number of Canoes Sold and Purchased
480
570
780
Total Cost
Variable Costs
$76,320
Fixed Costs
155,040
Total Costs
$231,360
Cost per unit
Variable Cost per unit
Fixed Cost per Unit
Total Cost per...
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follows:
Price per cake
$
14.51
Variable cost per
cake
Ingredients
2.16
Direct labor
1.07
Overhead (box,
etc.)
0.12
Fixed cost per
month
$
4,240.80
Required:
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dollars. (Round your Break-Even Units answer to the nearest
whole number. Round your other intermediate calculations and sales
dollars answer to 2...
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follows:
Price per cake
$
13.31
Variable cost per
cake
Ingredients
2.18
Direct labor
1.01
Overhead (box,
etc.)
0.22
Fixed cost per
month
$
3,465.00
1. Determine Cove’s break-even point in units
and sales dollars. (Round your Break-Even Units answer to
the nearest whole number. Round your other intermediate
calculations and sales dollars answer to 2 decimal...
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E6-4 Analyzing Changes in Price, Cost Structure, Degree of
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Cove’s Cakes is a local bakery. Price and cost information
follows:
Price per cake
$
14.31
Variable cost per cake
Ingredients
2.33
Direct labor
1.11
Overhead (box, etc.)
0.19
Fixed cost per month
$
3,524.40
Required:
1. Calculate Cove’s new break-even point under each of the
following independent scenarios: (Round your answer to the
nearest whole number.)
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b....
Problem 11-29 Margin of safety and operating leverage LO 11-6 Vernon Company is considering the addition...
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Vernon Company is considering the addition of a new product to its
cosmetics line. The company has three distinctly different options:
a skin cream, a bath oil, or a hair coloring gel. Relevant
information and budgeted annual income statements for each of the
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Breakeven, Target Profit, Margin of Safety, Operating
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week are as follows:
Revenue (2,000 kgs @ $4.80 per kg)
$9,600
Cost of ingredients
$3,200
Rent
800
Wages
4,800
8,800
Pretax income
800
Taxes (20%)
160
After-tax income
$ 640
All employees work standard shifts, no matter how much taffy is
produced or sold.
REQUIRED
A....
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