acct 212 homework 5 chapter 22

Orlando Company management predicts that it will incur fixed costs of $256,000 and earn pretax income of $443,600 in the next period. Its expected contribution margin ratio is 66%.

1.

Compute the amount of total dollar sales. (Omit the "$" sign in your response.)

2.

Compute the amount of total variable costs. (Omit the "$" sign in your response.)

Felix & Co. reports the following information about its sales and cost of sales.

Period

Units
Sold

Cost of
Sales

Period

Units
Sold

Cost of
Sales

1.

0

$

2,690

6.

2,190

5,690

2.

590

3,290

7.

2,590

6,290

3.

990

3,890

8.

2,990

6,890

4.

1,390

4,490

9.

3,390

7,490

5.

1,790

5,090

10.

3,790

8,754

Use the high-low method to calculate the variable component of the cost of sales. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

Use the high-low method to calculate the fixed component of the cost of sales. (Omit the "$" sign in your response.)

A pants maker is designing a new line of pants called the Redbird. The pants will sell for $330 per pair and cost $260.70 per pair in variable costs to make.

(1)

Compute the contribution margin per pair. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

(2)

Compute the contribution margin ratio. (Round your intermediate calculation to 2 decimal places. Omit the "%" sign in your response.)

Apollo Company manufactures a single product that sells for $310 per unit and whose total variable costs are $248 per unit. The company’s annual fixed costs are $992,000.

(1)

Prepare a contribution margin income statement for Apollo Company at the break-even point. (Leave no cells blank - be certain to enter "0" wherever required. Input all amounts as positive values. Omit the "$" sign in your response.)

(2)

Assume if the company’s fixed costs increase by $145,000, what amount of sales (in dollars) is needed to break even? (Omit the "$" sign in your response.)

Worksheet

Difficulty: Medium

Exercise 22-12 Income reporting and break-even analysis L.O. C2

Learning Objective: 22-C2 Describe several applications of cost-volume- profit analysis.

Apollo Company manufactures a single product that sells for $280 per unit and whose total variable costs are $224 per unit. The company targets an annual after-tax income of $980,000. The company is subject to a 30% income tax rate. Assume that fixed costs remain at $879,200.

(1)

Compute the unit sales to earn the target after-tax net income.

(2)

Compute the dollar sales to earn the target after-tax net income. (Omit the "$" sign in your response.)

Worksheet

Difficulty: Hard

Exercise 22-13 Computing sales to achieve target income L.O. C2

Learning Objective: 22-C2 Describe several applications of cost-volume- profit analysis.

Apollo Company manufactures a single product that sells for $113 per unit and whose total variable costs are $102 per unit. The company’s annual fixed costs are $626,000. The sales manager predicts that annual sales of the company’s product will soon reach 39,600 units and its price will increase to $196 per unit. According to the production manager, the variable costs are expected to increase to $136 per unit but fixed costs will remain $626,000. The income tax rate is 40%.

What amounts of pretax and after-tax income can the company expect to earn from these predicted changes? (Omit the "$" sign in your response.)

Greenspan Company management predicts $520,000 of variable costs, $820,000 of fixed costs, and a pretax income of $172,000 in the next period. Management also predicts that the contribution margin per unit will be $62.

(1)

Compute the total expected dollar sales for next period. (Omit the "$" sign in your response.)

(2)

Compute the number of units expected to be sold next period.

Home Builders sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $106 and of each door is $256. The variable cost of a window is $65.50 and of a door is $178.00. Fixed costs are $624,000.

(1)

Determine the selling price per composite unit. (Omit the "$" sign in your response.)

(2)

Determine the variable costs per composite unit (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

(3)

Determine the break-even point in composite units. (Round your intermediate calculation to 2 decimal places.)

(4)

Determine the number of units of each product that will be sold at the break-even point. (Round your intermediate calculation to 2 decimal places.)

Home Builders sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $114 and of each door is $264. The variable cost of a window is $69.50 and of a door is $182.00. Fixed costs are $499,200.

(1)

Determine the weighted-average contribution margin per unit. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

(2)

Determine the break-even point in units.

(3)

Determine the number of units of each product that will be sold at the break-even point. (Round your intermediate calculation to 2 decimal places.)

Hubert Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of tax returns follow. Hubert provides services in the ratio of 4:3:3 (easy, moderate, business). Fixed costs total $30,000 for the tax season.

Type of Return

Fee Charged

Variable Cost
per Return

Easy (form 1040EZ)

$

70

$

40

Moderate (form 1040)

145

85

Business

295

110

(1)

Determine the selling price per composite unit. (Omit the "$" sign in your response.)

(2)

Determine the variable costs per composite unit. (Omit the "$" sign in your response.)

(3)

Determine the breakeven point in composite units. (Round your answer to 2 decimal places.)

(4)

Determine the number of units of each product that will be sold at the break-even point. (Round your intermediate calculations to 2 decimal places and final answers to nearest units.)

Hubert Tax Service offers tax and consulting services to individuals and small businesses. Data for fees and costs of three types of tax returns follow. Hubert provides services in the ratio of 4:4:2 (easy, moderate, business). Fixed costs total $29,000 for the tax season.

Type of Return

Fee Charged

Variable Cost
per Return

Easy (form 1040EZ)

$

68

$

39

Moderate (form 1040)

143

84

Business

293

109

(1)

Determine the weighted-average contribution margin per unit. (Round your answer to 2 decimal places. Omit the "$" sign in your response.)

(2)

Determine the break-even point in units. (Round your answer to 1 decimal place.)

(3)

Determine the number of units of each product that will be sold at the break-even point. (Round your intermediate answers to 2 decimal places and final answers to nearest units.)

Company A is a manufacturer with current sales of $3,200,000 and a 50% contribution margin. Its fixed costs equal $1,140,000. Company B is a consulting firm with current service revenues of $3,200,000 and a 25% contribution margin. Its fixed costs equal $340,000.

1.

Compute the degree of operating leverage (DOL) for each company. (Round your answers to 1 decimal place.)

2.

Identify which company benefits more from a 20% increase in sales.

Worksheet

Difficulty: Medium

Exercise 22-21 Operating leverage computed and applied L.O. A2

Learning Objective: 22-A2 Analyze changes in sales using the degree of operating leverage.