okcesO'Reilly Incorporated makes and sells many consumer products. The firm's average contribution margin ratio is 22%. Management isconsidering adding a new product that will require an additional $10,500 per month of fixed expenses and will have variable expensesof $6.5 per unit.Required:a. Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 22%.Note: Round your answer to 2 decimal places.b. Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthlyoperating income by $8,500.Note: Do not round intermediate calculations.a. Selling priceb. Number of unitsper unit

Variable cost is the cost that changes with change in the activity of cost driver used. The variable…

Answered: O'Reilly Incorporated makes and sells…

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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5. Refer to the original data. By automating, the company could reduce variable expenses by $3 per unit. However, fixed expenses would increase by $53,000 each month. b. Assume that the company expects to sell 20,200 units next month. Prepare two contribution format income statements, one assuming that operations are not automated and one assuming that they are. (Show data on a per unit and percentage basis, as well as in total, for each alternative.)
Current operating income for Bay Area Cycles Company is $26,000. Selling price per unit is $100, the contribution margin ratio is 25%, and fixed expense is $104,000. Required: 1. Calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? 2. How many additional unit sales would be necessary to achieve operating income of $65,000? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate Bay Area Cycle's per unit variable expense and contribution margin. How many units are currently being sold? Revenue Variable expense Contribution margin Fixed expense Operating income $ Per Unit 100.00 Volume
A coat manufacturer wants to build a large factory or a small factory. The profit per coat is estimated as $12. Per year, a small factory's cost is $200,000, with a production capacity of 50,000 coats and a large factory's cost is $450,000, with a production capacity of 100,000 coats. The four levels of manufacturing demand that are considered likely are 30,000, 40,000, 50,000, and 100,000 coats per year. Complete parts (a) through (e). a. Determine the payoffs for the possible levels of production for a small factory. Manufacturing demand (coats per year) Payoff ($) 30,000 40,000 50,000 100,000 (Simplify your answers.)
2. Sooner Industries charges a price of $82 and has fixed cost of $325,000. Next year, Sooner expects to sell 14,800 units and make operating income of $187,000. What is the variable cost per unit? What is the contribution margin ratio? Note: Round your variable cost per unit answer to the nearest cent. Enter the contribution margin ratio as a percentage, rounded to two decimal places. Line Item Description Answer Variable cost per unit $fill in the blank 2 per unit Contribution margin ratio fill in the blank 3 %
A company estimates that it can sell 4,000 units each month of its product if it prices each unit at $80. However, its monthly number of sales will increase by 15 units for each $0.15 decrease in price. The company has fixed costs of $500. The cost to make each unit is $4.60, Find the level of production that maximizes the company's profit. They should produce units at a price of $ which will yield a profit of $
You Break It, We Fix-it Repair Shop has a monthly target profit of $18,900. Variable costs are 62% of sales, and monthly fixed costs are $7,500. (Note: 100% of Sales = Variable Costs + Contribution Margin). (Round your answers to two decimal places when needed and use rounded answers for all future calculations). 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal. (Fixed Costs (Fixed Costs + + + + Expected sales - Target Profit) Target Profit) 1 1 Contribution Margin per ratio (%) Contribution Margin ratio (%) = = = = Required Sales in Dollars to Break-even Required Sales in Dollars to meet Target Profit Break-even sales = Margin of safety in dollars 2. Express what You Break It, We Fix-it Repair Shop margin of safety is as a percentage of target ales. Margin of safety in dollars/ Expected sales in dollars = Margin of safety ratio (%)
A firm has the capacity to produce 599,374 units of a product each year. At present, it is operating at 21 percent of capacity. The firm's annual revenue is $1,054,613. Annual fixed costs are $346,003 and the variable costs are $.51 cents per unit. The following equations will be useful. Profit = Revenue - Costs Revenue = Price each * quantity Costs = Fixed Cost + Variable Costs Variable Cost = Variable Cost per unit * number of units At the break even point, Profit = 0 What is the price for each unit?
Management believes it can sell a new product for $9.00. The fixed costs of production are estimated to be $7,000, and the variable costs are $3.40 a unit. Complete the following table at the given levels of output and the relationships between quantity and fixed costs, quantity and variable costs, and quantity and total costs. Round your answers to the nearest dollar. Enter zero if necessary. Use a minus sign to enter losses, if any. Quantity Total Revenue Variable Costs Fixed Costs Total Costs Profits (Losses) 0 $ $ $ $ $ 500 $ $ $ $ $ 1,000 $ $ $ $ $ 1,500 $ $ $ $ $ 2,000 $ $ $ $ $ 2,500 $ $ $ $ $ 3,000 $ $ $ $ $ Determine the break-even level using the above table and use the Exhibit 19.5 to confirm the break-even level of output. Round your answers for the break-even level to the nearest whole number. Round your answers for the fixed costs, variable costs, total costs,…
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Hawk Homes, Ic., makes one type of birdhouse that it sells for $30.00 each. Its variable cost is $13.50 per house, and its fixed costs total $14,239.50 per year. Hawk currently has the capacity to produce up to 2,800 birdhouses per year, so its relevant range is 0 to 2,800 houses. Required: 1. Prepare a contribution margin income statement for Hawk assuming it sells 1,110 birdhouses this year. 2. Without any calculations, determine Hawk's total contribution margin if the company breaks even. 3. Calculate Hawk's contribution margin per unit and its contribution margin ratio. 4. Calculate Hawk's break-even point in number of units and in sales revenue. 5. Suppose Hawk wants to earn $21,000 this year. Determine how many birdhouses it must sell to generate this amount of profit. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Required 5 Prepare a contribution margin income statement for Hawk assuming it sells 1,110 birdhouses…
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