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 April May Standard 2,000 8,000 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 Sales, in units, over the past two months have been as follows: Deluxe 1,000 1,000 Standard $45.00 $ 27.00 $ 2.25 Pro 5,000 3,000 Total Deluxe $70.00 8,000 12,000 $ 35.00 $ 3.50 Pro $ 100.00 $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. Would the break-even point 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 determining your answer.
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 April May Standard 2,000 8,000 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 Sales, in units, over the past two months have been as follows: Deluxe 1,000 1,000 Standard $45.00 $ 27.00 $ 2.25 Pro 5,000 3,000 Total Deluxe $70.00 8,000 12,000 $ 35.00 $ 3.50 Pro $ 100.00 $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. Would the break-even point 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 determining your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
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:
Total
Standard Deluxe
2,000
8,000
Deluxe
$ 70.00
Pro
5,000
8,000
1,000
1,000 3,000 12,000
$35.00
$ 3.50
Pro
$ 100.00
$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. Would the break-even point 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
determining your answer.
Transcribed Image Text:Req 1A
Req 1B
Req 3
Req 4
Req 5
Compute the Racket Division's break-even point in dollar sales for April. (Round intermediate percentage calculations to 1
decimal place and final answer to the nearest whole dollar.)
Break-even point in dollar sales
< Req 1B
Req 4 >
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