C (v and vi) please r3.4.Gotcha Covered manufactures and sells leather cases for cell phones. Each case sells for$80. Variable manufacturing costs are $30 per case. We pay a sales commission of 10%of the selling price to our salespeople. Fixed manufacturing costs are $200,000 and fixedoperating costs are $35,000.Calculate the following amounts:Prob 3-38a.b.C.i.11.iii.iv.V.Target quantity if we want to generate Operating Income = $100,000Neatly draw a CVP Chart. Be sure to label everything relevant.We currently produce and sell 10,000 cases.What is our expected Operating Income?How much is our Margin of Safety in units and dollars?11.111.IV.V.V (variable cost per unit) and VC% (variable cost percentage)CM (contribution margin per unit) and CM% (contribution margin perc.)F (total fixed costs)Breakeven quantityvi.Prepare an Income Statement (through Oper Inc) using the GM format.Prepare an Income Statement (through Oper Inc) using the CM format.Our plant manager suggested we purchase a new machine which willlower our labor costs. This change will increase Fixed Costs by $30,000and reduce Variable Cost per Unit by $5. Calculate the new BreakevenQuantity and new expected Operating Income. Should we make thechange? Why or why not?Draw a graph (Total Costs as a function of #Units) of the original costfunction and the proposed cost function. Be sure to label everythingrelevant. What does the number of units at the intersection point of thesetwo lines indicate?

Answered: s for 10% fixed erc.) hat. hat. 11…

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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C (v and vi) please

r
3.
4.
Gotcha Covered manufactures and sells leather cases for cell phones. Each case sells for
$80. Variable manufacturing costs are $30 per case. We pay a sales commission of 10%
of the selling price to our salespeople. Fixed manufacturing costs are $200,000 and fixed
operating costs are $35,000.
Calculate the following amounts:
Prob 3-38
a.
b.
C.
i.
11.
iii.
iv.
V.
Target quantity if we want to generate Operating Income = $100,000
Neatly draw a CVP Chart. Be sure to label everything relevant.
We currently produce and sell 10,000 cases.
What is our expected Operating Income?
How much is our Margin of Safety in units and dollars?
11.
111.
IV.
V.
V (variable cost per unit) and VC% (variable cost percentage)
CM (contribution margin per unit) and CM% (contribution margin perc.)
F (total fixed costs)
Breakeven quantity
vi.
Prepare an Income Statement (through Oper Inc) using the GM format.
Prepare an Income Statement (through Oper Inc) using the CM format.
Our plant manager suggested we purchase a new machine which will
lower our labor costs. This change will increase Fixed Costs by $30,000
and reduce Variable Cost per Unit by $5. Calculate the new Breakeven
Quantity and new expected Operating Income. Should we make the
change? Why or why not?
Draw a graph (Total Costs as a function of #Units) of the original cost
function and the proposed cost function. Be sure to label everything
relevant. What does the number of units at the intersection point of these
two lines indicate?

Expert Solution

Step 1

As per the honor code of Bartleby we are bound to give the answer of first three sub part only, please post the remaining question separately so that our other expert will assist you on that.

Contribution Margin - It is the margin which is available after set off the variable cost. It can be calculated as follows

Contribution Margin = Selling price per unit - Variable cost per unit

Contribution Margin in percentage - This is also called profit volume ratio

Contribution Margin in percentage = (Selling price per unit - Variable cost per unit) / Selling price per unit

Break Even Point - It is the level of sales wherein the profit/loss is zero. Firm earns no profit at break even point. It can be calculated as follows.

Break even point (In Units) = Fixed Cost / Contribution per unit

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