Question

In: Accounting

Lilah and Juliet’s Book Company (LJBC) sells children’s books for $10 per book.Variable costs are $6...

Lilah and Juliet’s Book Company (LJBC) sells children’s books for $10 per book.Variable costs are $6 per book.Fixed costs are $300,000 per year.

1. How many books must LJBC sell in 2013 to earn a target profit of $ 100,000?

10,000

25,000

16,667

75,000

100,000

2. Assume LJBC in fact makes their 2013 target profit. What is LJBC’s margin of safety in dollars?

a. $100,000

b. $250,000

c. $400,000

d. $300,000

e. $750,000

3. Danny’s Manufacturing Company (DMC) sells a baby’s high chair for $50. DMC has a contribution margin ratio of 40% and annual fixed expenses of $250,000. In 2012, DMC sold 10,000 high chairs. DMC was disappointed in its results and is contemplating the following actions:

Lower the selling price of its product by 10%.

Reduce the fixed salaries of salesmen by $50,000 and give salesmen a commission of $2.00 per high chair sold.

Change the manufacturing process to reduce variable costs by $8.00 per high chair produced while increasing fixed expenses by $150,000. If DMC implements this plan, they will increase sales volume by 20%. What is the impact to DMC’s profit if it implements the plan described above?

Reduce profits by $48,000.

Increase profits by $40,000.

Increase profits by $52,000.

Reduce profits by $100,000.

Increase profits by $12,000.

Could you please be kind enough and show me the solutions and answers in detail?

Thank you so much and have a good one! :D

Expert Solution

Answer :




			Partuculars	amount
			sales (10perunit)	1000000
		Less	Variable cost (6 perunit)	600000
			Contribution	400000
		Less	Fixed Cost	300000
			Profit	100000



			let x be the unit
			10x-6x=400000
			4x=400000
			x= 100000



				since profit is given, we will go in reverse direction and calculate contribution and then keeping it equal to beloq equation; we will find number of units. HENCE NUMBER OF UNITS = 100000

			CALCULATION OF MARGIN OF SAFETY

			MARGIN OF SAFETY = ACTUAL SALES - SALES AT BREAKEVEN

			ACTUAL SALES = $1000000
			SALES AT BREAKEVEN = (FIXED COST / CONTRIBUTION PER UNIT ) * SALE PRICE PER UNIT
			FIXED COST = $300000
			CONTRIBUTION = $400000/100000 = $4
			SALE PRICE = $10

			SALES AT BREAKEVEN POINT =( 300000/4)*10 = $750000

			MARGIN OF SAFETY IN $ = $ 100000- $750000 = $250000



	OLD	NEW
UNIT SOLD	10000	12000	EXISTING	PROPSED
UNIT PRICE	50	45	SALES =$500000	SALES= $540000
FIXED COST	250000	350000	VC =$300000	VC=$252000
VC (PERUNIT)	30	24	CONTRIBUTION =$200000	CONTRIBUTION=$288000
CONTRIBUTION= SALES-VARIBALE COSTPROFIT= CONTRIBUTION- FIXED COST			FIXED COST= $250000	FC=$350000
			Loss = $50000	Loss=$98000

			LOSS WILL INCREASE BY $48000 = REDUCE PROFIT BY $48000

ekkarill92 answered 2 years ago

The Oriole Publications Textbook Company sells all of its books for $100 per book, and it...

The Oriole Publications Textbook Company sells all of its books for $100 per book, and it currently costs $50 in variable costs to produce each text. The fixed costs, which include depreciation and amortization for the firm, are currently $2 million per year. Management is considering changing the firm’s production technology, which will increase the fixed costs for the firm by 46 percent but decrease the variable costs per unit by 46 percent. If management expects to sell 45,000 books...

The Wildhorse Publications Textbook Company sells all of its books for $100 per book, and it...

The Wildhorse Publications Textbook Company sells all of its books for $100 per book, and it currently costs $50 in variable costs to produce each text. The fixed costs, which include depreciation and amortization for the firm, are currently $2 million per year. Management is considering changing the firm’s production technology, which will increase the fixed costs for the firm by 36 percent but decrease the variable costs per unit by 36 percent. If management expects to sell 45,000 books...

Quiz Company sells its product for $10 per unit. Variable costs are $6 per unit and...

Quiz Company sells its product for $10 per unit. Variable costs are $6 per unit and fixed costs are $15,000 per week. During the third week of July, Quiz Company sold 5,000 units. 1. Determine the number of units Quiz Company must sell to earn operating income of $8,000. 2. Determine the sales revenue (in dollars) Quiz Company must generate to break even. 3. Determine the sales revenue (in dollars) Quiz Company must generate to earn operating income of $8,000....

A bookshelf contains 6 German books, 4 Spanish books and 7 French books. Each book is...

A bookshelf contains 6 German books, 4 Spanish books and 7 French books. Each book is different from one another. How many different arrangements can be done of these books if (a) we put no restrictions on how they can be arranged? (b) books of each language must be next to each other? (c) all the French books must be next to each other? (d) no two French books must be next to each other?

A certain company sells its only product for $10 per unit. The variable costs to produce...

A certain company sells its only product for $10 per unit. The variable costs to produce the product are $3 per unit and it costs approximately $1 per unit for selling and administrative costs. The fixed costs of production are $400,000 per period and the fixed selling and administrative costs are $200,000 per year. The company is subject to a 20 percent tax rate. Answer the following questions. What is the breakeven point in units? What is the breakeven point...

A manufacturer produces a product that sells for $10 per unit. Variable costs per unit are...

A manufacturer produces a product that sells for $10 per unit. Variable costs per unit are $6 and total fixed costs are $12,000. At this selling price, the company earns a profit equal to 10% of total dollar sales. By reducing its selling price to $9 per unit, the manufacturer can increase its unit sales volume by 25%. Assume that there are no taxes and that total fixed costs and variable costs per unit remain unchanged. If the selling price...

Book bound sells a wide variety of books to retail bookstores. Book bound recently published two...

Book bound sells a wide variety of books to retail bookstores. Book bound recently published two new books: a popular mystery novel and a much less popular history book. Book bound requires bookstores to buy 10 copies of the history book for every 100 copies of the history novel ordered. True or False By bundling the two books together, book bound can force bookstores to pay more than they would be wiling to pay when purchasing the books separately. T/F

Sells price per unit=$200 variable manufacturing costs per unit= $50 variable S&A costs per unit= $10...

Sells price per unit=$200 variable manufacturing costs per unit= $50 variable S&A costs per unit= $10 Fixed MOH= $50,000 Fixed S&A costs=$10,000 Units produced=5000 Units sold= 4000 Produce a full absorption income statement, what is the operating income produce a variable costing income statement, what is the operating income if units produced exceeds untis sold, does full absorption accounting or varible cost account result in a higher operating income

21-B Book Street Books sells about 13701370 books each month. The circle graph displays the most...

21-B Book Street Books sells about 13701370 books each month. The circle graph displays the most popular book categories, by percentage, each month. Categories of Books Sold nonfiction 20.4%20.4% computer 43% science fiction 10% sports 11% mystery 15.6% Step 1 of 5: Find the number of nonfiction books sold each month. Round your answer to the nearest integer. Step 2 of 5: Find the number of computer books sold each month. Round your answer to the nearest integer. Step 3...

The Ageless Child, Inc. (“TAC” or “the Company”) is a public company that sells children’s fashions...

The Ageless Child, Inc. (“TAC” or “the Company”) is a public company that sells children’s fashions and educational toys and games. As an incentive to its employees, TAC established a compensation incentive plan in which a total of 100,000 options were granted on January 1, 2019. TAC’s stock price was $15.00 per share on that date. 718-20-55-10 The significant terms of the incentive plan are as follows: • The options have a $15.00 “strike” or exercise price. • For the...