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Accounting
Lomax Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 40,000 pairs of boots: Percentage of Costs Considered Variable Direct materials Direct labor Manufacturing overhead (fixed and variable) Selling and administrative expenses Totals Budgeted Costs $ 720,000 320,000 880,000 480,000 Budgeted Costs per Pair $ 18 100% 8 100 22 50 $ 2,400,000 12 $ 60 25 Required: a. Compute the sales price per unit that would result in a budgeted operating income of $720,000, assuming that the company produces and sells 40,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.) b. Assume that the company decides to sell the boots at a unit price of $90 per pair, b-1. Compute the total fixed costs budgeted for the year. b-2. Compute the variable cost per unit. b-3. Compute the contribution margin per pair of boots. b-4. Compute the number of pairs that must be produced and sold annually to break even if management decides to set the sales price at $90 per pair.

Lomax Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 40,000 pairs of boots: Percentage of Costs Considered Variable Direct materials Direct labor Manufacturing overhead (fixed and variable) Selling and administrative expenses Totals Budgeted Costs $ 720,000 320,000 880,000 480,000 Budgeted Costs per Pair $ 18 100% 8 100 22 50 $ 2,400,000 12 $ 60 25 Required: a. Compute the sales price per unit that would result in a budgeted operating income of $720,000, assuming that the company produces and sells 40,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.) b. Assume that the company decides to sell the boots at a unit price of $90 per pair, b-1. Compute the total fixed costs budgeted for the year. b-2. Compute the variable cost per unit. b-3. Compute the contribution margin per pair of boots. b-4. Compute the number of pairs that must be produced and sold annually to break even if management decides to set the sales price at $90 per pair.

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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Lomax Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 40,000 pairs of boots: Percentage of Costs Considered Variable Direct materials Direct labor Manufacturing overhead (fixed and variable) Selling and administrative expenses Totals Budgeted Costs $ 720,000 320,000 880,000 480,000 Budgeted Costs per Pair $ 18 100% 8 100 22 50 $ 2,400,000 12 $ 60 25 Required: a. Compute the sales price per unit that would result in a budgeted operating income of $720,000, assuming that the company produces and sells 40,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.) b. Assume that the company decides to sell the boots at a unit price of $90 per pair, b-1. Compute the total fixed costs budgeted for the year. b-2. Compute the variable cost per unit. b-3. Compute the contribution margin per pair of boots. b-4. Compute the number of pairs that must be produced and sold annually to break even if management decides to set the sales price at $90 per pair.
Transcribed Image Text:Lomax Corporation manufactures hiking boots. For the coming year, the company has budgeted the following costs for the production and sale of 40,000 pairs of boots: Percentage of Costs Considered Variable Direct materials Direct labor Manufacturing overhead (fixed and variable) Selling and administrative expenses Totals Budgeted Costs $ 720,000 320,000 880,000 480,000 Budgeted Costs per Pair $ 18 100% 8 100 22 50 $ 2,400,000 12 $ 60 25 Required: a. Compute the sales price per unit that would result in a budgeted operating income of $720,000, assuming that the company produces and sells 40,000 pairs. (Hint: First compute the budgeted sales revenue needed to produce this operating income.) b. Assume that the company decides to sell the boots at a unit price of $90 per pair, b-1. Compute the total fixed costs budgeted for the year. b-2. Compute the variable cost per unit. b-3. Compute the contribution margin per pair of boots. b-4. Compute the number of pairs that must be produced and sold annually to break even if management decides to set the sales price at $90 per pair.
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