4. Ribb Corporation produces and sells a single product. Data concerning that productappear below:Selling price.Variable expenses.Contribution margin...........Per UnitPercent of Sales$190100%57$13330%70%Fixed expenses are $913,000 per month. The company is currently selling 9,000 units permonth. Management is considering using a new component that would increase the unitvariable cost by $6. Since the new component would increase the features of thecompany's product, the marketing manager predicts that monthly sales would increase by400 units. What should be the overall effect on the company's monthly net operatingincome of this change?A. Decrease of $3,200B. Increase of $50,800C. Decrease of $50,800D. Increase of $3,200

Option a: This option is correct because calculations are shown below: OldNewContribution margin$133…

Answered: 4. Ribb Corporation produces and sells…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Klamath Company produces a single product. The projected income statement for the coming year is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. 2. Suppose 10,000 units are sold above break-even. What is the operating income? 3. Compute the contribution margin ratio. Use the contribution margin ratio to compute the break-even point in sales revenue. (Note: Round the contribution margin ratio to four decimal places, and round the sales revenue to the nearest dollar.) Suppose that revenues are 200,000 more than expected for the coming year. What would the total operating income be?
Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.
Delta Co. sells a product for $150 per unit. The variable cost per unit is $90 and fixed costs are $15,250. Delta Co.s tax rate is 36% and the company wants to earn $44,000 after taxes. What would be Deltas desired pre-tax income? What would be break-even point in units to reach the income goal of $44,000 after taxes? What would be break-even point in sales dollars to reach the income goal of $44000 after taxes? Create a contribution margin income statement to show that the break-even point calculated in B, generates the desired after-tax income.
Abilene Industries manufactures and sells three products (XX, W, and ZZ). The sales price and unit variable cost for the three products are as follows: Their sales mix is reflected as a ratio of 4:2:1. Annual fixed costs shared by the three products are $345.000 per year. What are total variable costs for Abilene with their current product mix? Calculate the number of units of each product that will need to be sold in order for Abilene to break even. What is their break-even point in sales dollars? Using an income statement format, prove that this is the break-even point.
(Please answer question 3) Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Quantity Total Revenue Variable Costs Fixed Costs Total Costs Profits (Loss) 0 500 1,000 1,500 2,000 2,500 3,000 2. Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output. PQB = FC + VQB PQB - VQB = FC QB (P-V) = FC QB = FC P-V 3. What would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management…
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B. C. D&R Corporation has annual revenues of $375,000, an average contribution margin ratio of 32%, and fixed expenses of $150,000. Required: a. Management is considering adding a new product to the company's product line. The new item will have $9.52 of variable costs per unit. Calculate the selling price that will be required if this product is not to affect the average contribution margin ratio. b. If the new product adds an additional $26,880 to D&R's fixed expenses, how many units of the new product must be sold at the price calculated in part a to break even on the new product? c. If 16,000 units of the new product could be sold at a price of $15.50 per unit, and the company's other business did not change, calculate D&R's total operating income and average contribution margin ratio. Complete this question by entering your answers in the tabs below. Required A Required B Management is considering adding a new product to the company's product line. The new item will have $9.52 of…
Management believes it can sell a new product for $8.50. The fixed costs of production are estimated to be $6,000, and the variable costs are $3.20 a unit. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Quantity Total Revenue Variable Costs Fixed Costs Total Costs Profits (Loss) 0 500 1,000 1,500 2,000 2,500 3,000 Determine the break-even level using the above table and use the following Equation to confirm the break-even level of output. PQB = FC + VQB PQB - VQB = FC QB (P-V) = FC QB = FC P-V What would happen to the total revenue schedule, the total cost schedule, and the break-even level of output if management determined that fixed costs would…
Alba Company is considering the introduction of a new product. To determine the selling price of this product, you have gathered the following information: • Direct material cost per unit Direct labor cost per unit • Variable manufacturing cost per unit Total fixed manufacturing costs.. • Variable selling and administration cost per unit Total fixed selling and administration costs.. .$3,000 .$2,250 ..S1,000 .S1,750,000 ..$1,250 .$550,000 If the company requires a rate of return 18% on its investments and $6,000,000 investments are needed. The total direct materials to be used in the production is $3,000,000. Required: 1. If the company uses absorption costing approach to cost-plus pricing, compute: a. The unit product cost. b. The markup percentage. c. The selling price per unit. 2. Assume that the company is considering the introduction of other new product. If the target-selling price per unit is $5,500 and the company investing $5,000,000 to purchase equipment needed produce 500…
6. Compare the following two companies: Company A is a retail merchandise firm with current sales of $4,000,000 and a 45% contribution margin. Company A's fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company B’s fixed costs are $375,000. The following names are to be considered when completing this problem: Operating Income Variable Costs Sales Fixed Costs per Unit Selling Price per Unit Variable Cost per Unit Contribution Margin Fixed Costs Operating Loss to help complete this problem. All amounts are rounded to whole dollars and shown with "$" and commas as needed (i.e. $12,345). Based on the information given, prepare a complete contribution margin income statement for Company A: Company A Contribution Margin Income Statement Projected Based on the information given, prepare a complete contribution margin income statement for Company B: Compute…
The Cumberland Company provides the following information: Sales (250,000 units) Manufacturing costs: Variable Fixed Selling and administrative costs: Variable Fixed $625,000 212,500 37,500 100,000 25,000 5. What is the contribution margin ratio for Cumberland? 6. What is the total contribution margin for Cumberland? 7. What is the operating income for Cumberland? 8. What is the break-even point in sales dollars for Cumberland?

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