Homework Help is Here – Start Your Trial Now!
Business
Accounting
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 $74 Direct Labour Variable Manufacturing Overhead $48 Fixed Manufacturing Overhead Fixed Selling Costs Fixed expenses: $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. b) c) Calculate Benoit's break-even point in units and in sales dollars.

Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 $74 Direct Labour Variable Manufacturing Overhead $48 Fixed Manufacturing Overhead Fixed Selling Costs Fixed expenses: $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. b) c) Calculate Benoit's break-even point in units and in sales dollars.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Using CPV analysis answers the attached

AA Aa- E 处 AaBbCc[ AaBbcc) AaBbCc[ AaBbCc[ AaBbCc[ AaBbCcD A、ツ、A. = 前。 1 Body Text THeading 1 T List Para... T No Spac.. I Normal 1 Table Pa... Paragraph Styles 2. 5 1 6 7 1 10 1 11 12 1 13 1 14 1 15 1 16 117 18 19 20 Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholders desired profit level for 2020? Is this a viable option? g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of safety: (i) Increase in sales volume (ii) Increase in total fixed costs (iii) Increase in selling price per unit (iv) Decrease in variable costs per unit
Transcribed Image Text:AA Aa- E 处 AaBbCc[ AaBbcc) AaBbCc[ AaBbCc[ AaBbCc[ AaBbCcD A、ツ、A. = 前。 1 Body Text THeading 1 T List Para... T No Spac.. I Normal 1 Table Pa... Paragraph Styles 2. 5 1 6 7 1 10 1 11 12 1 13 1 14 1 15 1 16 117 18 19 20 Assume that as a result of reorganizing the production process, the management of Benoit Manufacturing was able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw material used in the production process. Variable manufacturing overhead per unit would also decrease by $3. The business is also considering paying additional annual commission of $36,400 to its sales team as part of the sales expansion effort, which should result in an increase in sales revenue. The head of the marketing department has indicated that the effort of the sales team should result in a 5% increase in sales volume. What must the new selling price per unit be if the company wishes to meet the shareholders desired profit level for 2020? Is this a viable option? g) Briefly explain the impact of each of the following scenarios on the break-even point and the margin of safety: (i) Increase in sales volume (ii) Increase in total fixed costs (iii) Increase in selling price per unit (iv) Decrease in variable costs per unit
References Mailings Review View V Tell me what cu want to do... A A Aa - 21 T AaBbCc[ AaBbcel AaBbCc[ AaBbCc[ AaBbCc[ AaBbCc A- yA 前。 T Body Text THeading 1 T List Para... T No Spac.. T Normal T Table Pa Paragraph Styles 5 1 6 I 7 1 10 12 1 13 1 14 1 15 1 16. I 17 1 18 1 19. Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. b) c) Calculate Benoit's break-even point in units and in sales dollars. d) Calculate the margin of safety in units and in sales dollars. The President of Benoit is under pressure from shareholders to increase operating income by 50% in 2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this a realistic goal? e)
Transcribed Image Text:References Mailings Review View V Tell me what cu want to do... A A Aa - 21 T AaBbCc[ AaBbcel AaBbCc[ AaBbCc[ AaBbCc[ AaBbCc A- yA 前。 T Body Text THeading 1 T List Para... T No Spac.. T Normal T Table Pa Paragraph Styles 5 1 6 I 7 1 10 12 1 13 1 14 1 15 1 16. I 17 1 18 1 19. Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $58 Direct Labour $74 Variable Manufacturing Overhead $48 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. b) c) Calculate Benoit's break-even point in units and in sales dollars. d) Calculate the margin of safety in units and in sales dollars. The President of Benoit is under pressure from shareholders to increase operating income by 50% in 2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this a realistic goal? e)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Capital Budgeting
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.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS