Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Question
Chapter 16, Problem 40P
1.
To determine
Ascertain the break-even point in units and sales revenue.
2.
To determine
Compute the margin of safety in sales revenue for previous year.
3.
To determine
Draft the income statement for the new proposal and ascertain the break-even point in units.
Expert Solution & Answer
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Students have asked these similar questions
Victoria Company produces a single product. Last year’s income statement is as follows:
Required:1. Compute the break-even point in units and sales dollars calculated using the break-evenunits.2. What was the margin of safety for Victoria last year in sales dollars?3. Suppose that Victoria is considering an investment in new technology that will increasefixed cost by $250,000 per year but will lower variable costs to 45% of sales. Units soldwill remain unchanged. Prepare a budgeted income statement assuming that Victoriamakes this investment. What is the new break-even point in sales dollars, assuming thatthe investment is made?
Kreter, Inc. earned net income of $300,000 last year. This year it wants to earn net income of $450,000. The company's fixed costs are expected to be $300,000, and variable costs are expected to be 70% of sales.
Determine the required sales to meet the target net income of $450,000 using the mathematical equation.
Required sales
$
Using a CVP income statement format, prove your answer.
Fixed costsTarget net income / (Loss)SalesVariable costsContribution margin
$
Contribution marginFixed costsTarget net income / (Loss)SalesVariable costs
Contribution marginSalesVariable costsFixed costsTarget net income / (Loss)
Fixed costsVariable costsSalesTarget net income / (Loss)Contribution margin
SalesFixed costsContribution marginVariable costsTarget net income / (Loss)
$
Mountville's results for the year and the potential new investment are shown
below. The new investment is approved and expected to create sales of
$100,000, a contribution margin of 70% of sales and added fixed costs of
$40,000. If the manager gets a bonus of 10% of Residual income, what is the
change in bonus expected for next year expected to be (assume rest of firm
operates same as last year)? Express as a whole number.
Sales
Variable expenses
Fixed expenses
$1,000,000
$300,000
$500,000
Average operating assets $800,000
Minimum rate of return 9%
New investment
$268,000
Chapter 16 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 16 - Prob. 1DQCh. 16 - Describe the difference between the units-sold...Ch. 16 - Define the term break-even point.Ch. 16 - Explain why contribution margin per unit becomes...Ch. 16 - A restaurant owner who had yet to earn a monthly...Ch. 16 - What is the variable cost ratio? The contribution...Ch. 16 - Prob. 7DQCh. 16 - Suppose a firm with a contribution margin ratio of...Ch. 16 - Prob. 9DQCh. 16 - Explain how CVP analysis developed for single...
Ch. 16 - Prob. 11DQCh. 16 - How do income taxes affect the break-even point...Ch. 16 - Explain how a change in sales mix can change a...Ch. 16 - Explain how a change in sales mix can change a...Ch. 16 - Prob. 15DQCh. 16 - Prob. 1CECh. 16 - Prob. 2CECh. 16 - Health-Temp Company is a placement agency for...Ch. 16 - Olivian Company wants to earn 420,000 in net...Ch. 16 - Vandenberg, Inc., produces and sells two products:...Ch. 16 - Prob. 6CECh. 16 - Prob. 7CECh. 16 - Prob. 8ECh. 16 - Gelbart Company manufactures gas grills. Fixed...Ch. 16 - Schylar Pharmaceuticals, Inc., plans to sell...Ch. 16 - Prob. 11ECh. 16 - Prob. 12ECh. 16 - Big Red Motors, Inc., employs 15 sales personnel...Ch. 16 - Sports-Reps, Inc., represents professional...Ch. 16 - Campbell Company manufactures and sells adjustable...Ch. 16 - Prob. 16ECh. 16 - Sara Pacheco is a sophomore in college and earns a...Ch. 16 - Carmichael Corporation is in the process of...Ch. 16 - Choose the best answer for each of the following...Ch. 16 - Prob. 20ECh. 16 - Income statements for two different companies in...Ch. 16 - Prob. 22ECh. 16 - Prob. 23ECh. 16 - Busy-Bee Baking Company produces a variety of...Ch. 16 - Prob. 25ECh. 16 - Jester Company had unit contribution margin on...Ch. 16 - Loessing Company produced and sold 12,000 units...Ch. 16 - Junior Company has a breakeven point of 34,600...Ch. 16 - Prob. 29ECh. 16 - If a companys variable cost per unit increases,...Ch. 16 - Prob. 31PCh. 16 - More-Power Company has projected sales of 75,000...Ch. 16 - Consider the following information on four...Ch. 16 - Hammond Company runs a driving range and golf...Ch. 16 - Prob. 35PCh. 16 - Faldo Company produces a single product. The...Ch. 16 - Katayama Company produces a variety of products....Ch. 16 - Prob. 38PCh. 16 - Prob. 39PCh. 16 - Prob. 40PCh. 16 - Salem Electronics currently produces two products:...Ch. 16 - Good Scent, Inc., produces two colognes: Rose and...
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