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Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $88, and the Deluxe set sells for $103. The variable expenses associated with each set are given below. Standard Deluxe 29.00 $44.00 Variable production costs Sales commissions (29% of sales price) $ $ The company's fixed expenses each month are: 25.52 $29.87

Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $88, and the Deluxe set sells for $103. The variable expenses associated with each set are given below. Standard Deluxe 29.00 $44.00 Variable production costs Sales commissions (29% of sales price) $ $ The company's fixed expenses each month are: 25.52 $29.87

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $88, and the Deluxe set sells for $103. The variable expenses associated with each set are given below. Standard Deluxe 29.00 $44.00 Variable production costs Sales commissions (29% of sales price) Advertising Depreciation Administrative The company's fixed expenses each month are: $ 119,000 $ 25,900 $ 70,000 April May $ $ 5,400 3,400 8,800 2,400 6,400 8,800 Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, in sets, for the last two months are given below: Standard Deluxe Total 25.52 $ 29.87 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3-a. Compute the break-even point in dollar sales for April. 3-b. Would the break-even point in May be higher or lower than the break-even point in April?
Transcribed Image Text:Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $88, and the Deluxe set sells for $103. The variable expenses associated with each set are given below. Standard Deluxe 29.00 $44.00 Variable production costs Sales commissions (29% of sales price) Advertising Depreciation Administrative The company's fixed expenses each month are: $ 119,000 $ 25,900 $ 70,000 April May $ $ 5,400 3,400 8,800 2,400 6,400 8,800 Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, in sets, for the last two months are given below: Standard Deluxe Total 25.52 $ 29.87 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3-a. Compute the break-even point in dollar sales for April. 3-b. Would the break-even point in May be higher or lower than the break-even point in April?
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