The contribution margin income statement of Delectable Donuts for August 2020 follows: DELECTABLE DONUTS Contribution Margin Income Statement Month Ended August31,2020 Sales Revenue $ 150,000 Variable Costs: Cost of Goods Sold $ 41,000 Selling Costs 15,000 Administrative Costs 4,000 60,000 Contribution Margin 90,000 Fixed Costs: Selling Costs 37,800 Administrative Costs 12,600 50,400 Operating Income $ 39,600 Delectable sells four dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4.00, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $5.00, with total variable cost of $2.00 per dozen. Requirements 1 Calculate the weighted-average contribution margin. 2 Determine Delectable's monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed. 3 Compute Delectable's margin of safety in dollars for August 2020. E Delesteble Depute Esti ote the

The contribution margin income statement of Delectable Donuts for August 2020 follows: DELECTABLE DONUTS Contribution Margin Income Statement Month Ended August31,2020 Sales Revenue $ 150,000 Variable Costs: Cost of Goods Sold $ 41,000 Selling Costs 15,000 Administrative Costs 4,000 60,000 Contribution Margin 90,000 Fixed Costs: Selling Costs 37,800 Administrative Costs 12,600 50,400 Operating Income $ 39,600 Delectable sells four dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4.00, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $5.00, with total variable cost of $2.00 per dozen. Requirements 1 Calculate the weighted-average contribution margin. 2 Determine Delectable's monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed. 3 Compute Delectable's margin of safety in dollars for August 2020. E Delesteble Depute Esti ote the

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: The contribution margin is calculated as difference between sales and variable costs. The break even…

Q: KPR manufactures is planning to introduce energy flavored milk from 1 July 2019. In this respect,…

A: Formulas:-

Q: Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: Step 1:Answer 1.Computation of the overall contribution margin (CM) ratio for the company:Overall…

Q: Pharoah Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60 cents…

A: The Break Even point is a point at which a company has no income and no loss. The company recovered…

Q: Croy Inc. has the following projected sales for the next five months: Sales in Month Units April…

A: The production budget is prepared to estimate the number of units to be produced during the period.…

Q: Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: Break even point :— It is the point of production where total cost is equal to total revenue. At…

Q: Required information [The following information applies to the questions displayed below.] Shadee…

A: The budget is prepared to estimate the requirements during the period. The expenses budget is…

Q: ABC Inc. has sales of $2,000,000 for the first quarter of 2019. In making the sales, the company…

A: Income Statement is a statement that contains the all the Revenue and Expense for a Reporting…

Q: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent…

A: Lets understand the basics.Whenever organization to choose between whether to continue operation or…

Q: Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: The weighted average contribution margin is used to calculate the overall break-even point of an…

Q: Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent…

A: If the segment is discontinued, there may be contractual obligations, depreciation, and other costs…

Q: Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic and Sure Shot. Monthly…

A: Profit PlanningIt is the process of anticipating profit under varying conditions and anlying the…

Q: ucido Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: The overall contribution margin can be calculated by dividing the total contribution margin by total…

Q: Splish Golf Ltd. produces and sells special golf balls for $20.00 for a pack of three. In May 2022,…

A: Calculation of total cost per pack for absorption and variable costing with all necessary working…

Q: Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income…

A: Step 1:Breakeven point of sales is the level of sales where total sales is equals to the total…

Q: A restaurant budgets for overhead expenses of $430,000 and a profit of $65,000 based on sales of…

A: Pricing is the process of determining the value that a manufacturer will get for the exchange of…

Q: Handy’s Hats makes the world’s best hats. Information for the last eight months follows: Month…

Q: The following information has been provided by the Giant Panda Stores, Inc., for the first quarter…

A: Contribution Margin The contribution margin can be expressed in either…

Q: Provide true calculation

Q: Hawthorne Wipes sells sanitizing wipes. They started 2020 with 6.000 packs of wipes, the cost of…

A: Weighted Average Cost per Unit = Purchases + Cost Beginning StockBeginning Units + Total Units…

Q: The following is Pacific Limited’s contribution format income statement for January 2022:…

A: selling expense per unit = $ 1,400,000/ 25,000 units Selling expenses per unit = $ 56 Variable…

Q: Crane Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents…

A: Lets understand the basics.The income statement as per the CVP income statement indicates the total…

Q: Milden Company is a merchandiser that plans to sell 41,000 units during the next quarter at a…

A: The income statement shows the company's income and expenses over some time.Net profit arises when…

Q: Required information [The following information applies to the questions displayed below.] Shadee…

A: The computation of net income anticipated in the future is referred to as a budgeted income…

Q: Milden Company is a merchandiser that plans to sell 37,000 units during the next quarter at a…

A: ABSORPTION COSTINGAbsorption Costing is a Cost Management Accounting method in which all costs…

Q: The relevant fixed cost in the decision to discontinue the Linens Department is: multiple choice 1…

A: Drop or Continue decisions are very important decisions for a business entity as these decisions…

Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

100%

Calculating breakeven point for two products, margin of safety, and operating leverage
The contribution margin income statement of Delectable Donuts for August 2020 follows:
DELECTABLE DONUTS
Contribution Margin Income Statement
Month Ended August 31,2020
Sales Revenue
$ 150,000
Variable Costs:
Cost of Goods Sold
$ 41,000
Selling Costs
15,000
Administrative Costs
4,000
60,000
Contribution Margin
90,000
Fixed Costs:
Selling Costs
37,800
Administrative Costs
12,600
50,400
Operating Income
$ 39,600
Delectable sells four dozen plain donuts for every dozen custard-filled donuts. A dozen plain
donuts sells for $4.00, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts
sells for $5.00, with total variable cost of $2.00 per dozen.
Requirements
1 Calculate the weighted-average contribution margin.
2 Determine Delectable's monthly breakeven point in dozens of plain donuts and
custard-filled donuts. Prove your answer by preparing a summary contribution
margin income statement at the breakeven level of sales. Show only two
categories of costs: variable and fixed.
3 Compute Delectable's margin of safety in dollars for August 2020.
4 Compute the degree of operating leverage for Delectable Donuts. Estimate the
new operating income if total sales increase by 20%. (Round the degree of
operating leverage to four decimal places and the final answer to the nearest
dollar. Assume the sales mix remains unchanged.)
Prove your answer to Requirement 4 by preparing a contribution margin income
statement with a 20% increase in total sales. (The sales mix remains unchanged.)

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 3 steps with 1 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

TARGET SALES UNITS Determine the number of cakes a bakery must sell to gerate $1,100 in profit based on the following information: Price per cake $14.71 Variable Cost per cake Ingredients $2.25 Direct Labor $ 1.02 Overhead $.25 Fixed Cost Per Month $4,476
7
Wesley Power Tools manufactures a wide variety of tools and accessories. One of its more popular items is a cordless power handisaw. Each handisaw sells for $40. Wesley expects the following unit sales: January 2,200 February 2,500 March 2,700 April 2,500 May 2,100 Wesley’s ending finished goods inventory policy is 35 percent of the next month’s sales. Suppose each handisaw takes approximately 0.65 hour to manufacture, and Wesley pays an average labor wage of $13.50 per hour. Each handisaw requires two plastic components that Wesley purchases from a supplier at a cost of $3.00 each. The company has an ending direct materials inventory policy of 10 percent of the following month’s production requirements. Materials other than the plastic components total $4.50 per handisaw. Manufacturing overhead for this product includes $66,000 annual fixed overhead (based on production of 24,000 units) and $0.90 per unit variable manufacturing overhead. Wesley’s selling expenses are 6 percent of…
Bed & Bath, a retailing company, has two departments-Hardware and Linens. The company's most recent monthly contribution format income statement follows: Total Department Hardware Linens Sales $4,200,000 $3,090,000 $1,110,000 Variable expenses 1,240,000 840,000 400,000 Contribution margin 2,960,000 2,250,000 710,000 Fixed expenses 2,300,000 1,470, 000 830,000 Net operating income (loss) $ 660,000 $ 780,000 $ (120,000) A study indicates that $379,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 11% decrease in the sales of the Hardware Department. Required: What is the financial advantage ( disadvantage) of discontinuing the Linens Department?
The following is Pacific Limited’s contribution format income statement for January 2022: Sales $1,400,000 Variable expenses 700,000 Contribution margin 700,000 Fixed expenses 400,000 Net operating income $ 300,000 The company has no beginning or ending inventories and produced and sold 25,000 units during the month. Required (show your calculation): a. The company’s top management team is currently investigating how many units they need to sell to reach the break-even point. Also, they want to know how much revenue they need to generate to reach the break-even point. What do you think? d.d. Company’s Marketing Manager is confident that she can increase sales by 28% next year with some effort. What would be the expected percentage increase in net operating income? Use the degree of operating leverage concept to compute your answer
I. Cost Behavior and Estimation (HP 6) The owners of Mormont Co., Jorah and Lyanna, are expecting sales for August, 2019 to be 250,000 units. Information about Mormont's Sales and costs over the past three months, are as follows: Units Sold Sales Cost of Goods Sold Wage & Salary Expense Admin Expense May O 200,000 300,000 $3,450,000 $5,175,000 $1,575,000 $2,312,500 $950,000 $975,000 $1,300,000 $1,600,000 June July 500,000 $8,625,000 $3,787,500 $1,925,000 $2,500,000 Required: Based on the information provided, provide a projected income statement, using the contribution margin format. 5
Olympia Productions Incorporated makes award medallions that are attached to ribbons. Each medallion requires 18 inches of ribbon. The sales forecast for March is 2,000 medallions. Estimated beginning inventories and desired ending inventories for March are as follows: (Assume 18 inches = 0.5 yards) Estimated Beginning Medallions Ribbon (yards) Inventory 1,100 70 Desired Ending Inventory 750 23 Required: a. Calculate the number of medallions to be produced in March. b. Calculate the number of yards of ribbon to be purchased in March. a. Number of medallions produced b. Number of yards of ribbon purchased
The Walton Toy Company manufactures four dolls and a sewing kit. It provided the following data for next year: Demand Next Selling Price year (units) per Unit 61,000 $ 20.00 53,000 46,000 Direct Materials $ 5.40 $2.20 $ 8.09 $ 3.10 $ 6.50 $33.50 44,400 $14.00 336,000 $ 9.10 $ 4.30 Product Debbie Trish Sarah Mike Sewing kit The following additional information is available: a. The company's plant has a capacity of 113,140 direct labor-hours per year on a single-shift basis. Each employee and piece of equipment are capable of making all five products. b. Next year's direct labor pa rate will be $9 per hour. c. Fixed manufacturing costs total $630,000 per year. Variable overhead costs are $2 per direct labor-hour. d. All of the company's nonmanufacturing costs are fixed. e. The company's finished goods inventory is negligible and can be ignored. Required: 1. How many direct labor-hours are used to manufacture one unit of each of the company's five products? 2. How much variable overhead…
The following monthly data are available for the Phelps Company: Product A Product B $150,000 $130,000 Variable expenses $91,000 $104,000 Contribution margin $59,000 $26,000 Fixed expenses Operating income The break-even sales for the month for the company are: Sales Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a $203,000 Product C $90,000 $27,000 $63,000 foonnnn. Total $370,000 $222,000 $148,000 $55,000