Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separatefactories and markets them through different channels. They have no shared costs. This year, the company sold 50,000units of each product. Income statements for each product follow.SalesVariable costsContribution marginFixed costsIncomeContribution marginCarvings$ 2,000,0001,600,000400,000125,000$ 275,0002. Assume that the company expects sales of each product to decline to 30,000 units next year with no change in unit selling price.Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products).Income (loss)Mementos$ 2,000,000250,0001,750,0001,475,000$ 275,000UnitsHENNA CompanyContribution Margin Income StatementCarvings$ Per unitTotalMementos$ Per unitTotalTotal

Contribution Margin Income Statement -This statement includes Sales, Variable Costs and Fixed…

Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Income statements for each product follow. Sales Variable costs Contribution margin Fixed costs Income Contribution margin Carvings $ 2,000,000 1,600,000 400,000 125,000 $ 275,000 Income (loss) 2. Assume that the company expects sales of each product to decline to 30,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). Units Mementos $ 2,000,000 250,000 1,750,000 1,475,000 $ 275,000 $ Per unit HENNA Company Contribution Margin Income Statement Carvings Total Mementos $ Per unit Total Total

Henna Company produces and sells two products, Carvings and Mementos. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Income statements for each product follow. Sales Variable costs Contribution margin Fixed costs Income Contribution margin Carvings $ 2,000,000 1,600,000 400,000 125,000 $ 275,000 Income (loss) 2. Assume that the company expects sales of each product to decline to 30,000 units next year with no change in unit selling price. Prepare a contribution margin income statement for the next year (as shown above with columns for each of the two products). Units Mementos $ 2,000,000 250,000 1,750,000 1,475,000 $ 275,000 $ Per unit HENNA Company Contribution Margin Income Statement Carvings Total Mementos $ Per unit Total Total

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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Bailey Corporation manufactures and sells a number of products, including Product G. Results for last year for the manufacture and sale of Product G are as follows: Sales Less expenses: Variable production costs Sales commissions Salary of product manager Fixed product advertising Fixed manufacturing overhead Net operating loss $450,000 110,000 95,000 80,000 70,000 $750,000 805,000 ($55,000) Bailey is trying to decide whether or not to discontinue the manufacture and sale of Product G. All expenses other than fixed manufacturing overhead are avoidable if the product is dropped. None of the fixed manufacturing overhead is avoidable. Assume that dropping Product G would result in a $40,000 increase in the contribution margin of other product lines. If Bailey chooses to drop Product G, then the change in net operating income next year due to this action will be a: $95,000 increase $95,000 decrease $25,000 decrease $25,000 increase
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Sunn Company manufactures a single product that sells for $215 per unit and whose variable costs are $172 per unit. The company's annual fixed costs are $597,700. (a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. Numerator: (c) Compute the company's break-even point in units. 1 1 Numerator: 1 1 Numerator: Denominator: Denominator: (d) Compute the company's break-even point in dollars of sales. 1 1 Denominator: = = II II = Contribution Margin Ratio Contribution margin ratio Break-Even Units Break-even units Break-Even Dollars Break-even dollars
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ABC Corporation manufactures a product that gives rise to a by-product called Z. The only costs associated with Z are selling costs of P1 for each unit sold. ABC accounts for Z sales first b deducting its separable costs from such sales and then by deducting this net amount from cost of sales of the major product. This year, 1,000 units of Z were sold at P4 each. If ABC changes its method of accounting for Z sales by showing the net amount as additional sales revenue, ABC's gross margin would*a. decrease by P3,000b. increase by P4,000c. increase by P3,000d. be unaffected
Deluxe Homes is a residential Home Builder. Based on their current production of 300 homes per year, they currently make a profit of $20,000 per unit, based on the following costs per unit: Direct labor $ 20,000 Direct materials 200,000 Variable overhead 30,000 Fixed overhead 40,000 Variable selling costs 10,000 Fixed selling costs 10,000 Total costs per unit $310,000 Required Each of these are separate situations: A. Prepare an income statement based on the information provided. B. What is the profit and cost per unit if production is increased to 400 homes per year, and there is an increase of $1.50 million in total fixed overhead costs?
Choose the product that will have the largest loss if sales greatly decrease. Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.
Sunn Company manufactures a single product that sells for $210 per unit and whose variable costs are $168 per unit. The company's annual fixed costs are $575,400. (a) Compute the company's contribution margin per unit. Contribution margin (b) Compute the company's contribution margin ratio. 1 Numerator: (c) Compute the company's break-even point in units. 1 1 Numerator: Denominator: Numerator: Denominator: (d) Compute the company's break-even point in dollars of sales. 1 1 Denominator: II Contribution Margin Ratio Contribution margin ratio Break-Even Units Break-even units 0 Break-Even Dollars Break-even dollars 4
Assume you are the department B manager for Marleys manufacturing. Marley’s operates under a cost-based transfer structure. Assume you receive the majority of your raw materials from department A, which sells only to department B (they have no outside sales) Assume the market price for the items your department purchase is 15% below what you are being charged by department A of Marley’s manufacturing. Determine the operating income for department B, assuming department A “sold” department B 1,000 unit during the month and department A reduced the selling price to the market price. Round your percentage answer to one decimal.
A manufacturing company decides which of three mutually exclusive products to make in its factory on the basis of maximising the company's throughput accounting ratio. Current data for the three products is shown in the following table: Product X Product Y Product Z $20 Selling price per unit $60 $40 Direct material cost per unit $40 $10 $16 Machine hours per unit 10 20 2.5 Total factory costs (excluding direct materials) are $150,000. The company cannot make enough of any of the products to satisfy external demand entirely as machine hours are restricted. Which of the following actions would improve the company's existing throughput accounting ratio? Increase the selling price of product Z by 10% Increase the selling price of product Y by 10% Reduce the material cost of product Z by 5% O Reduce the material cost of product Y by 5%
Cox Electric makes electronic components and has estimated the following for a new design of one of its products. Fixed cost = $23,750 • Material cost per unit = $0.17 • Labor cost per unit = $0.11 • Revenue per unit = $0.66 Note that fixed cost is incurred regardless of the amount produced. Per-unit material and labor cost together make up the variable cost per unit. Assuming that Cox Electric sells all that it produces, profit is calculated by subtracting the fixed cost and total variable cost from total revenue. Construct an appropriate spreadsheet model to find the profit based on a given production level and use the spreadsheet model to answer these questions. (a) Construct a one-way data table with production volume as the column input and profit as the output. Breakeven occurs when profit goes from a negative to a positive value; that is, breakeven is when total revenue = the total cost, yielding a profit of zero. Vary production volume from 0 to 100,000 in increments of 10,000.…
Assume that the company expects sales of each product to increase to 64,000 units next year with no change in unit sales price. Prepare forecasted financial results for next year following the format of the contribution margin income statement shown with columns for each of the two products (assume a 32% tax rate). Letter Co. produces and sells two products, T and O. It manufactures these products in separate factories and markets them through different channels. They have no shared costs. This year, the company sold 50,000 units of each product. Sales and costs for each product follow.