Please answer part a, b, c. Please show ALL supporting workings where necessary and state any assumption(s) made.Thank you. HLS Manufacturing Company manufactures and sells parts for various musical gadgets. The followinginformation to a single part which is used in the production of a wind instrument. The business earned OperatingIncome of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure fromshareholders to increase operating income in 2020 and is therefore considering the implementation of strategiesmainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and totalfixed costs were as follows:Variable expenses per unit:Direct Material$58Direct Labour$74Variable Manufacturing Overhead $48Fixed expenses:$215,000Fixed Manufacturing OverheadFixed Selling Costs$65,000Fixed Administrative Costs$160,000Required:You are required show ALL supporting workings where necessary and state any assumption(s)made.a)Compute the selling price per unit in 2019, using the equation method.b)Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin incomestatement for the year ended December 31, 2019, detailing the components of total fixed costs andclearly showing contribution and net income.c)Calculate HLS'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 HLS 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 thenumber of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is this arealistic goal?f)Assume that as a result of reorganizing the production process, the management of HLS Manufacturingwas able to reduce direct material cost per unit by $5 due to a change in the supplier of the raw materialused 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 aspart of the sales expansion effort, which should result in an increase in sales revenue. The head of themarketing department has indicated that the effort of the sales team should result in a 5% increase insales volume. What must the new selling price per unit be if the company wishes to meet theshareholders 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 ofsafety:(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

Break even point means a point where firm is neither earning profit nor incurring any loss. Break…

HLS 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 $215,000 $65,000 $160,000 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs Required: You are required show ALL supporting workings where necessary and state any assumption(s) made. a) Compute the selling price per unit in 2019, using the equation method. b) 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. c) Calculate HLS's break-even point in units and in sales dollars.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q