Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs $190,000 $115,000 $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (c) Calculate Valencia's break-even point in units and in sales dollars.

Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs Fixed Administrative Costs $190,000 $115,000 $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (c) Calculate Valencia's break-even point in units and in sales dollars.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 4PA: Markham Farms reports the following contribution margin income statement for the month of August....

See similar textbooks

Related questions

Q: A Swiss Interior Company produces and sells lamps that are sold usually all year round. The company…

A: Normal capacity includes the number of units a company is able to manufacture or sell under normal…

Q: pany manufactures and sels musical gadgets The businesss earned Income of $220.000 in 2018, when…

A: Note: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question…

Q: During 2019, Basler Manufacturing produced 60,000 units and sold 55,000 for $10 per unit. Variable…

A: The product cost per unit has been calculated by adding the variable and fixed manufactring cost per…

Q: Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating…

A: a. PX = VX + FC + Profit Where, P = Price per unit X = Number of units sold V = Variable cost per…

Q: (a) You have just begun your summer internship at Valencia Manufacturing. To expand sales, the…

Q: Required: a.Assume that as a result of reorganizing the production process, Valencia Manufacturing…

A: Break-Even Sales: Sales volume required to cover the fixed and variable costs and left out with…

Q: Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating…

Q: During 2022, Bridgeport Corp. produced 45,100 units and sold 36,080 for $14.00 per unit. Variable…

A: Income statement is a financial statement that shows profitability, total revenue and total expenses…

Q: Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating…

A: Break-even point is the point wherein revenues equals expenses or contribution equals fixed costs.…

Q: Oriole Company builds custom fishing lures for sporting goods stores. In its first year of…

A: Income statement is a financial statement that shows profitability, total revenue and total expenses…

Q: Darin Musical Company manufactures and sells parts for musical gadgets. The business earned net…

A: Hey, since there are multiple requirements posted, we will answer first three requirements. If you…

Q: During the year 2016, Jane Company manufactured 30,000 units out of which 22,000 units were sold.…

A: Statement of Cost of Goods Sold Using Absorption costing is given below,

Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned
Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia
is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs
were as follows:
Variable expenses per unit:
Direct Material
$40
Direct Labour
$32
Variable Manufacturing Overhead
$18
Fixed expenses:
Fixed Manufacturing Overhead
Fixed Selling Costs
Fixed Administrative Costs
$190,000
$115,000
$135,000
Required:
(a)
Using the equation method, calculate the number of units sold in 2018.
(b)
Given the sales units calculated in Part (a), prepare a contribution margin income statement for the
year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing
contribution and net income.
(c)
Calculate Valencia's break-even point in units and in sales dollars.

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 3 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

SmokeCity, Inc., manufactures barbeque smokers. Based on past experience, SmokeCity has found that its total annual overhead costs can be represented by the following formula: Overhead cost = 543,000 + 1.34X, where X equals number of smokers. Last year, SmokeCity produced 20,000 smokers. Actual overhead costs for the year were as expected. Required: 1. What is the driver for the overhead activity? 2. What is the total overhead cost incurred by SmokeCity last year? 3. What is the total fixed overhead cost incurred by SmokeCity last year? 4. What is the total variable overhead cost incurred by SmokeCity last year? 5. What is the overhead cost per unit produced? 6. What is the fixed overhead cost per unit? 7. What is the variable overhead cost per unit? 8. Recalculate Requirements 5, 6, and 7 for the following levels of production: (a) 19,500 units and (b) 21,600 units. (Round your answers to the nearest cent.) Explain this outcome.
The cost data for Evencoat Paint for the year 2019 is as follows: Using the high-low method, express the companys maintenance costs as an equation where x represents the gallons of paint produced. Then estimate the fixed and variable costs. Predict the maintenance costs i190,000 gallons of paint are produced. Predict the maintenance costs if 81,000 gallons of paint are produced. Using Excel, create a scatter graph of the cost data and explain the relationship between gallons of paint produced and equipment maintenance expenses.
Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.
The expected costs for the Maintenance Department of Stazler, Inc., for the coming year include: Fixed costs (salaries, tools): 64,900 per year Variable costs (supplies): 1.35 per maintenance hour Estimated usage by: Actual usage by: Required: 1. Calculate a single charging rate for the Maintenance Department. 2. Use this rate to assign the costs of the Maintenance Department to the user departments based on actual usage. Calculate the total amount charged for maintenance for the year. 3. What if the Assembly Department used 4,000 maintenance hours in the year? How much would have been charged out to the three departments?
Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farm assuming it purchases the new equipment. Assume sales level remains unchanged.
pany manufactures and sels musical gadgets The businesss earned Income of $220.000 in 2018, when seling price per unit was $200, and the president of Valencia s under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as folows Vanable expenses per unit Direct Material Direct Labour Variable Manufacturing Overhead $40 $32 Fored expenses $18 0 Faed Manufacturing Overhead Faed Seing Costs Fixed Administrative Costs $190.000 $115.000 $135.000440c Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income. (e) Calculate Valencia's break-even point in units and in sales dollars Calculate the margin of safety in units and in sales dollars (d) The management of Valencia Manufacturing…
Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Samantha is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Required: (d) Calculate the margin of safety in units and in sales dollars. (e) The management of Samantha Manufacturing Company is desirous of increasing operating income by 20% in 2019. They expect per unit data and total fixed costs to remain the same in 2018. Determine the number of units that must be sold to…
Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Samantha is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 Required: (a) Using the equation method, calculate the number of units sold in 2018. (b) Given the sales units calculated in Part (a), prepare a contribution margin income statement for the year ended December 31, 2018, detailing the composition of total fixed costs and clearly showing contribution and net income.…
Samantha Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Samantha is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable expenses per unit: Direct Material $40 Direct Labour $32 Variable Manufacturing Overhead $18 Fixed expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Costs $115,000 Fixed Administrative Costs $135,000 (g) You have just begun your summer internship at Samantha Manufacturing. To expand sales, the business is considering paying a commission to its sales team. You have been asked to compute 1) the new break-even sales figure, and 2) the operating profit if sales increase by 10% under the new sales commission plan.…
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable Expenses per unit :direct material $40 direct labour $32 variable manufacturing overhead $18 Fixed Expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Cost $115,000 Fixed Administrative Costs $135,000 Required: (a) You have just begun your summer internship at Valencia Manufacturing. To expand sales, thebusiness is considering paying a commission to its sales team. You have been asked to compute 1)the new break-even sales figure, and 2) the operating profit if sales increase by 10% under the new sales commission plan. She is confident that you can handle the task, because you learned CVP analysis in your accounting class.You…
Valencia Manufacturing Company manufactures and sells musical gadgets. The business earned Operating Income of $220,000 in 2018, when selling price per unit was $200, and the president of Valencia is under pressure to increase operating income in 2019. Data for variable cost per unit and total fixed costs were as follows: Variable Expenses per unit :direct material $40 direct labour $32 variable manufacturing overhead $18 Fixed Expenses: Fixed Manufacturing Overhead $190,000 Fixed Selling Cost $115,000 Fixed Administrative Costs $135,000 Required: a.Assume that as a result of reorganizing the production process, Valencia Manufacturing Company was able to reduce direct material cost per unit by $5 due to a change in the quality of raw material used in the production process but the expected sales of 6,000 units would decrease by 5% and total fixed costs are expected to increase by $94,000. What must the new selling price per unit be if the company wishes to meet the…
Please assist