Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets-the Standard, the Deluxe, and the Pro-that are widely used in amateur play. Selected information on the rackets is given below: Selling price per racket Variable expenses per racket: Fixed production costs Advertising expense Administrative salaries Total Production Selling (5% of selling price) All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: April May Standard $ 45.00 Per Month $ 138,000 118,000 68,000 $ 324,000 Standard 2,000 8,000 Sales, in units, over the past two months have been as follows: $ 27.00 $ 2.25 Deluxe $70.00 Deluxe Pro Total 1,000 5,000 8,000 3,000 12,000 1,000 Pro $ 100.00 $35.00 $ 3.50 $36.00 $5.00 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3. Compute the Racket Division's break-even point in dollar sales for April. 4. Will the break-even point would be higher or lower with May's sales mix than with April's sales mix? 5. Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in
Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis rackets-the Standard, the Deluxe, and the Pro-that are widely used in amateur play. Selected information on the rackets is given below: Selling price per racket Variable expenses per racket: Fixed production costs Advertising expense Administrative salaries Total Production Selling (5% of selling price) All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs: April May Standard $ 45.00 Per Month $ 138,000 118,000 68,000 $ 324,000 Standard 2,000 8,000 Sales, in units, over the past two months have been as follows: $ 27.00 $ 2.25 Deluxe $70.00 Deluxe Pro Total 1,000 5,000 8,000 3,000 12,000 1,000 Pro $ 100.00 $35.00 $ 3.50 $36.00 $5.00 Required: 1-a. Prepare contribution format income statements for April. 1-b. Prepare contribution format income statements for May. 3. Compute the Racket Division's break-even point in dollar sales for April. 4. Will the break-even point would be higher or lower with May's sales mix than with April's sales mix? 5. Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Transcribed Image Text:Topper Sports, Incorporated, produces high-quality sports equipment. The company's Racket Division manufactures three tennis
rackets-the Standard, the Deluxe, and the Pro-that are widely used in amateur play. Selected information on the rackets is given
below:
Selling price per racket
Variable expenses per racket:
Fixed production costs
Advertising expense
Administrative salaries
Total
Standard
$ 45.00
Production
Selling (5% of selling price)
All sales are made through the company's own retail outlets. The Racket Division has the following fixed costs:
Per Month
$ 138,000
118,000
68,000
$ 324,000
April
May
$ 27.00
$ 2.25
Sales, in units, over the past two months have been as follows:
Deluxe
$ 70.00
Standard Deluxe Pro Total
2,000
1,000 5,000 8,000
8,000
1,000 3,000 12,000
Pro
$ 100.00
$ 35.00
$ 3.50
$36.00
$5.00
Required:
1-a. Prepare contribution format income statements for April.
1-b. Prepare contribution format income statements for May.
3. Compute the Racket Division's break-even point in dollar sales for April.
4. Will the break-even point would be higher or lower with May's sales mix than with April's sales mix?
5. Assume that sales of the Standard racket increase by $21,800. What would be the effect on net operating income? What would be
the effect if Pro racket sales increased by $21,800? Do not prepare income statements; use the incremental analysis approach in
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