**Hudson Co. Contribution Margin Income Statement for 2019 and Forecast for 2020**Hudson Co. has presented its contribution margin income statement for the year ended December 31, 2019, and is preparing a forecast for 2020 based on proposed changes in advertising costs.**2019 Contribution Margin Income Statement**- **Sales**: $2,160,000 (9,600 units at $225 each)- **Variable Costs**: $1,728,000 (9,600 units at $180 each)- **Contribution Margin**: $432,000 (Sales - Variable Costs)- **Fixed Costs**: $324,000- **Pretax Income**: $108,000 (Contribution Margin - Fixed Costs)---**2020 Forecasted Contribution Margin Income Statement**The marketing manager proposes that increasing advertising costs by $81,000 in 2020 could increase the company's sales volume to 11,000 units. The forecast involves recalculating the potential impact on the contribution margin and pretax income.The table for 2020 is prepared with placeholders for recalculated values:- **Sales**: To be calculated - **Variable Costs**: To be calculated - **Contribution Margin**: To be calculated - **Fixed Costs**: $ (including additional advertising costs)- **Income (Pretax)/Loss**: To be calculated The key consideration is whether the additional advertising costs should be incurred based on the impact on overall profitability. ### Required Information**Hudson Co. Contribution Margin Income Statement for 2019**- For Year Ended December 31, 2019 - **Sales (9,600 units at $225 each):** $2,160,000 - **Variable costs (9,600 units at $180 each):** $1,728,000 - **Contribution Margin:** $432,000 - **Fixed Costs:** $324,000 - **Pretax Income:** $108,000### Analysis QuestionsIf the company raises its selling price to $240 per unit:1. **Compute Hudson Co.'s contribution margin per unit.**2. **Compute Hudson Co.'s contribution margin ratio.**3. **Compute Hudson Co.'s break-even point in units.**4. **Compute Hudson Co.'s break-even point in sales dollars.**### Answers and Corrections1. **Contribution margin:** $60 per unit ✓2. **Contribution margin ratio:** 25% ✓3. **Break-even point:** 7,200 units ✓4. **Break-even sales dollars:** $1,620,000 ✗The table indicates that the answer is complete but not entirely correct, specifically for the break-even sales dollars.

Forecasted Contribution Margin Income Statement Particulars Units Amounts Sales 11,000 225…

1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co's contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co's break-even point in sales dollars.

1. Compute Hudson Co.'s contribution margin per unit. 2. Compute Hudson Co's contribution margin ratio. 3. Compute Hudson Co.'s break-even point in units. 4. Compute Hudson Co's break-even point in sales dollars.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: A product has a sales price of $350 and a per-unit contribution margin of $139. What is the…

A: Formula: Contribution margin ratio = Per unit contribution margin / sales price per unit Division of…

Q: TRUE OR FALSE. 1. Sales Revenue = Selling Price per unit x Total number of units sold 2. Operating…

A: As the question has more than 3 sub-parts, the first 3 subparts are answered as per guidelines. If…

Q: 17. During the current year, the net sales of Regine Company, were 10% below last vear's level. You…

A: There are three types of costs that are fixed, variable, and semi-variable.

Q: Dennis Ltd makes a single product, the Flair. Over the next period, period 1, Dennis Ltd plans to…

A: 1- Calculation of total contribution and contribution per unit. Contribution= sales - variable…

Q: lo Company distributes a single product. The company's sales and expenses for last month follow:…

A: The contribution margin is calculated as difference between sales and variable costs. The break even…

Q: What is the breakeven sales in dollars if : Total sales, $120,000; Total variable cost, $ 48,000;…

A: Contribution margin = Total sales - Total variable cost = 120,000 - 48,000 = $72,000

Q: A product has a sales price of $340 and a per-unit contribution margin of $136. What is the…

A: Contribution Margin: The Contribution Margin is also can be treated on a gross or per unit basis.…

Q: e the company's overall profit if it sells exactly the break-even qua

A: Breakeven Point is a point at which the company makes no profit or loss. It is where the…

Q: In the month of March, Blossom Salon services 620 clients at an average price of $120. During the…

A: Variable costs are costs that varies with the change in the level of output whereas fixed costs are…

Q: A company produces and sells a product. The company has found that the costto produce x units of the…

A: The objective of the question is to find the number of units the company should produce and sell to…

Q: I. What is the break- even point in dollar sales? J. How many units must be sold to achieve a…

A: “Since you have posted a question with multiple sub-parts, we will solve first three subparts for…

Q: Complete the following problems using the following ratios:…

A: Break even point is sales at which the operating income is zero that means fixed cost and variable…

Q: Calculate the break even number of units if the fixed expenses are $7,000 and the contribution…

A: Given, Fixed expenses = $7000 Contribution margin per unit = $14

Q: A company has return on sales of 15% at sales of $400,000. Its fixed cost are $90,000; variable…

A: Solution.. Return on sales = 15% Sales = $400,000 Fixed cost = $90,000 Variable cost = $25 per…

Q: Cost-volume-profit (CVP) analysis with multiple products assumes that sales will continue at the…

A: The objective of the question is to identify which of the given options will most likely change if…

Q: 1. The function of a company's product to produce output at the level of input use is Q=-1/3x3 +9x3…

A: Introduction Output Price The output price index estimates the average change in price of all…

Q: Calculate the break-even point in units. units Calculate the break-even point in sales revenue.…

A: Introduction:- CVP analysis is used to identify the changes in costs and volume affect a…

Q: Which of the following equations is true? Multiple Choice Dollar sales for company to break even…

A: CVP analysis is used to identify the changes in costs and volume affect a company's operating…

Q: How many statements below regarding margin of safety are correct? 1. It is the amount by which sales…

Q: Lamp Company has the following cost-volume-profit (CVP) data: Breakeven point, in units 3,000…

A: The break even sales are the sales where business earns no profit no loss during the period.

Q: Sarah Allen owns and operates Blossom, a bakery that creates personalized birthday cakes for a…

A: Break-even units represent the number of units sold to cover the costs like variable and fixed. When…

Q: Compute the break-even point in sales dollars for the company as a whole and the margin of safety in…

A: Break-even point refers to a point at which the company earns neither profit nor deficit. If the…

Question

**Hudson Co. Contribution Margin Income Statement for 2019 and Forecast for 2020**

Hudson Co. has presented its contribution margin income statement for the year ended December 31, 2019, and is preparing a forecast for 2020 based on proposed changes in advertising costs.

**2019 Contribution Margin Income Statement**

- **Sales**: $2,160,000
(9,600 units at $225 each)

- **Variable Costs**: $1,728,000
(9,600 units at $180 each)

- **Contribution Margin**: $432,000
(Sales - Variable Costs)

- **Fixed Costs**: $324,000

- **Pretax Income**: $108,000
(Contribution Margin - Fixed Costs)

---

**2020 Forecasted Contribution Margin Income Statement**

The marketing manager proposes that increasing advertising costs by $81,000 in 2020 could increase the company's sales volume to 11,000 units. The forecast involves recalculating the potential impact on the contribution margin and pretax income.

The table for 2020 is prepared with placeholders for recalculated values:

- **Sales**: To be calculated
- **Variable Costs**: To be calculated
- **Contribution Margin**: To be calculated
- **Fixed Costs**: $ (including additional advertising costs)
- **Income (Pretax)/Loss**: To be calculated

The key consideration is whether the additional advertising costs should be incurred based on the impact on overall profitability.

### Required Information

**Hudson Co. Contribution Margin Income Statement for 2019**

- For Year Ended December 31, 2019
- **Sales (9,600 units at $225 each):** $2,160,000
- **Variable costs (9,600 units at $180 each):** $1,728,000
- **Contribution Margin:** $432,000
- **Fixed Costs:** $324,000
- **Pretax Income:** $108,000

### Analysis Questions

If the company raises its selling price to $240 per unit:
1. **Compute Hudson Co.'s contribution margin per unit.**
2. **Compute Hudson Co.'s contribution margin ratio.**
3. **Compute Hudson Co.'s break-even point in units.**
4. **Compute Hudson Co.'s break-even point in sales dollars.**

### Answers and Corrections

1. **Contribution margin:** $60 per unit ✓
2. **Contribution margin ratio:** 25% ✓
3. **Break-even point:** 7,200 units ✓
4. **Break-even sales dollars:** $1,620,000 ✗

The table indicates that the answer is complete but not entirely correct, specifically for the break-even sales dollars.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

1. Calculate the contribution margin rate, the sales dollar breakeven point, and the unit sales breakeven point. 2. Use the following information to perform your calculations. a. Net Sales: $50,000.00 b. Contribution Margin: $20,000.00 c. Total Fixed Costs: $15,500.00 d. Unit Sales Price: $25.00 3. Provide the formula and write out the equation that you use for each calculation. a. Contribution Margin Rate: b. Sales Dollar Breakeven Point: C. Unit Sales Breakeven Point:
The total cost formula for a company can be modeled by TC = 12570+ 50x where x represents the number of items sold. A formula for the company's total income is modeled with TR 80x, where a represents the number of items sold. This company will breakeven when its total costs equal its total income. - How many items must this company sell to breakeven? Answer:
5. Calculate the ratio of variable-costs-to-sales for a firm with RM1,500,000 break-even revenues and RM400,000 fixed costs.
Now suppose that annual unit sales, variable cost, and unit price are equal to their respective expected values—that is, there is no uncertainty. Determine the company's annual profit for this scenario. Round answer to a whole number, if needed.$
If an organization wants to make a profit, it must generate more sales revenue than the total costs it incurs. This relation can be expressed using which of the following profit equations? O a. Operating income = [(Sales price per unit - Variable cost per unit) x #units sold] - Fixed cost O b. Operating income = [Sales price per unit - Fixed cost per unit) x # units produced] -Variable cost Oc Operating income Sales revenue - Total variable costs - Discretionary costs O d. Operating income - Sales revenue - Committed costs - Fixed costs
a) Compute the breakeven sales dollars of cach product assuming the same sales mix remains constant. b) Prepare an analysis showing whether Product Z should be eliminated. The amount of change to net income should be computed. c) Assume the current demand of cach product is same as the sales volume the company has for the year. Below is the machine processing time required for cach product. Product Machine processing time in hours i. How many units should the company produce for each product if there is a constraint of only 24.000 hours of machine processing time in the year. ii. Compute the highest possible net income camed by the company. 3 2 An accountant has prepared the folowing product-line income statement for the year: Product Tatal No of mts sokd 5,000 4,000 4,000 Saks Varible enpermes 200,000 S 120,000 100,000 S 60.000 40,000 S 20,000 60,000 40,000 20,000 Cotribution mangin 80,000 40,000 20,000 Fihed expenses Rert Depreciin 10,000 12,000 8,000 5.000 6,000 2,000 2,400 3,000…
How do you calculate the break-even point in sales? Contribution margin fixed costs Fixed costs total sales Profit variable costs Fixed costs contribution margin % 0,000