Contribution Margin, CVP, Net Income, Margin of Safety Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows: Bottle, packing material $1.15 Acrylic base $0.86 Pigments Selling commission 0.57 0.14 Other ingredients 0.43 Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year Required: 1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent per unit What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.) 2. How many bottles must be sold to break even? bottles What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. $ 3. What was Nail Glow's operating income last year? 4. What was the margin of safety in revenue? 5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units. bottles Should Nail Glow raise the price?
Contribution Margin, CVP, Net Income, Margin of Safety Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows: Bottle, packing material $1.15 Acrylic base $0.86 Pigments Selling commission 0.57 0.14 Other ingredients 0.43 Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year Required: 1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent per unit What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.) 2. How many bottles must be sold to break even? bottles What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations. $ 3. What was Nail Glow's operating income last year? 4. What was the margin of safety in revenue? 5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units. bottles Should Nail Glow raise the price?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Contribution Margin, CVP, Net Income, Margin of Safety
Nail Glow, Inc., produces novelty nail polishes. Each bottle sells for $5.90. Variable unit costs are as follows:
Bottle, packing material $1.15
Acrylic base
$0.86
Pigments
Selling commission
0.57
0.14
Other ingredients
0.43
Fixed overhead costs are $34,475 per year. Fixed selling and administrative costs are $6,720 per year. Nail Glow sold 35,000 bottles last year
Required:
1. What is the contribution margin per unit for a bottle of nail polish? Round your answer to the nearest cent
per unit
What is the contribution margin ratio? Round your answer to four decimal places. Use the rounded value in the subsequent computations. (Express as a decimal-based amount rather than a whole percent.)
2. How many bottles must be sold to break even?
bottles
What is the break-even sales revenue? Round your answer to the nearest dollar, if rounding is required. Use the rounded value in the subsequent computations.
$
3. What was Nail Glow's operating income last year?
4. What was the margin of safety in revenue?
5. Suppose that Nail Glow, Inc., raises the price to $6.50 per bottle, but anticipated sales will drop to 28,750 bottles. What will the new break-even point in units be? Round your answer to the nearest whole number of units.
bottles
Should Nail Glow raise the price?
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!
Trending now
This is a popular solution!
Step by step
Solved in 7 steps with 6 images
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education