Two businesses, Y Ltd. and Z Ltd., sell the same type of product inthe same type of market.Their budgeted profit and loss accounts for the coming year are as follows :Y Ltd.Z Ltd.$Sales1,50,0001,50,0001,00,000Less : Variable Cost1,20,000ContributionLess : Fixed CostBudgeted Net Profit30,00015,00050,00035,00015,00015,000You are required to : (a) calculate the break even point of each business ; (b) calculate the salesvolume at which each of business will earn $ 5,000 profit ; (c) calculate at which sales volume boththe firms will earn equal profits.

Answer - a) Calculation of Breakeven Point : Formula - {P/V Ratio= Cost / Sales} For Y Ltd= P/V…

Two businesses, Y Ltd. and Z Ltd., sell the same type of product in the same type of market. Their budgeted profit and loss accounts for the coming year are as follows : Y Ltd. Z Ltd. 2$ Sales 1,50,000 1,20,000 1,50,000 1,00,000 Less : Variable Cost Contribution Less : Fixed Cost 30,000 50,000 35,000 15,000 15,000 Budgeted Net Profit 15,000 You are required to : (a) calculate the break even point of each business ; (b) calculate the sales volume at which each of business will earn $ 5,000 profit ; (c) calculate at which sales volume both the firms will earn equal profits.

Two businesses, Y Ltd. and Z Ltd., sell the same type of product in the same type of market. Their budgeted profit and loss accounts for the coming year are as follows : Y Ltd. Z Ltd. 2$ Sales 1,50,000 1,20,000 1,50,000 1,00,000 Less : Variable Cost Contribution Less : Fixed Cost 30,000 50,000 35,000 15,000 15,000 Budgeted Net Profit 15,000 You are required to : (a) calculate the break even point of each business ; (b) calculate the sales volume at which each of business will earn $ 5,000 profit ; (c) calculate at which sales volume both the firms will earn equal profits.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Break-Even in Sales Revenue, Variable-Costing Ratio, Contribution Margin Ratio, Margin of Safety Hammond Company runs a driving range and golf shop. The budgeted income statement for the coming year is as follows. Sales $1,240,000 Less: Variable expenses 706,800 Contribution margin $533,200 Less: Fixed expenses 425,000 Income before taxes $108,200 Less: Income taxes 43,280 Net income $64,920 1. What is Hammond’s variable cost ratio? Enter your answer as a decimal value rounded to two decimal places. What is the contribution margin ratio? Enter your answer as a decimal value rounded to two decimal places. (Express as a decimal-based amount rather than a whole percent.)f 2. Suppose Hammond’s actual revenues are $200,000 greater than budgeted. By how much will before-tax profits increase? Calculate the answer without preparing a new income statement. 3. How much sales revenue must Hammond earn in order to break even? Round your answer to the nearest dollar. What…
The South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets 1. 2. 3. Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. Return on Investment $2,950,000 1,947,000 Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $155,000. Reduce average operating assets by 4%. Action 1 595,000 (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.) Action 2 5,000,000 Action 3 (b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.) Return on investment do % % % %
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: EstimatedFixed Cost Estimated Variable Cost(per unit sold) Production costs: Direct materials — $19 Direct labor — 13 Factory overhead $105,800 10 Selling expenses: Sales salaries and commissions 22,000 4 Advertising 7,400 — Travel 1,700 — Miscellaneous selling expense 1,800 4 Administrative expenses: Office and officers' salaries 21,500 — Supplies 2,600…
Searchlight, Inc. uses ROI to evaluate operations and requires the return on its operating units to be 9%. Operating data for the Western division is shown below: Sales $1,000,000 Controllable margin 120,000 Total average assets 600,000 Fixed costs 60,000 How much is ROI for the year? A. 20% B. 17% C. 10% D. 30%
6
Required Information [The following information applies to the questions displayed below.] The fixed budget for 21,500 units of production shows sales of $559,000; variable costs of $64,500; and fixed costs of $142,000. If the company actually produces and sells 26,500 units, calculate the flexible budget Income. Sales Variable costs Contribution margin Fixed costs Income ------Flexible Budget-..... Variable Amount Total Fixed per Unit Cost $ 689,000 689,000 ------Flexible Budget at 21,500 units $ $ 0 0 26,500 units $ $ 0 0
Assume a retailing company has two departments-Department A and Department B. The company's most recent contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Multiple Choice O The company says that $110,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B? O O O $(148,000) $(152,000) $(147,600) Total $ 800,000 320,000 $(127,600) 480,000 400,000 $ 80,000 Department A Department B $ 350,000 $ 450,000 120,000 200,000 230,000 250,000 260,000 140,000 $ 90,000 $ (10,000)
The South Division of Wiig Company reported the following data for the current year. Sales Variable costs Controllable fixed costs Average operating assets 1. 2 $3,000,000 1,950,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action. 3. 600,000 5,000,000 Increase sales by $300,000 with no change in the contribution margin percentage. Reduce variable costs by $150,000. Reduce average operating assets by 6.25%. (a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%)
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows: EstimatedFixed Cost Estimated Variable Cost(per unit sold) Production costs: Direct materials — $28 Direct labor — 19 Factory overhead $495,200 14 Selling expenses: Sales salaries and commissions 102,900 6 Advertising 34,800 — Travel 7,700 — Miscellaneous selling expense 8,500 6 Administrative expenses: Office and officers' salaries 100,600 — Supplies 12,400…
Contribution margin, break-even sales, cost-volume-profit chart, marginof safety, and operating leverageBelmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for theyear is therefore assumed to be equal to the cost of goods sold. With thisin mind, the various department heads were asked to submit estimatesof the costs for their departments during the year. A summary report ofthese estimates is as follows: (attached) It is expected that 12,000 units will be sold at a price of $240 a unit.Maximum sales within the relevant range are 18,000 units.Instructions 1. Prepare an estimated income statement for 20Y7.2. What is the expected contribution margin ratio?3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-evensales.5. What is the expected margin of safety in dollars and as apercentage of sales?6. Determine the operating leverage.