Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
6th Edition
ISBN: 9780134486857
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 20, Problem 41AP
The contribution margin income statement of Sugar Lips Donuts for August 2018 follows:
Sugar Lips sells three dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4.00, with total variable cost of $1.80 per dozen. A dozen custard-filled donuts sells for $8.00, with total variable cost of $3.60 per dozen.
Requirements
- 1. Calculate the weighted-average contribution margin.
- 2. Determine Sugar Lips’s monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.
- 3. Compute Sugar Lips’s margin of safety in dollars for August 2018.
- 4. Compute the degree of operating leverage for Sugar Lips Donuts. Estimate the new operating income if total sales increase by 30%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains unchanged.)
- 5. Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 30% increase in total sales. (The sales mix remains unchanged.)
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Currently, Sweet Treats Bakery sells 1,200 cupcakes per month. The owners would like to increase net income above what is currently
earned. Fixed costs are $1,500 per month and their contribution margin is $3 per cupcake. What would be a reasonable net income
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Calculating breakeven point for two products, margin of safety, and operating leverage.
The Contribution margin income statement of Sugar Lips Donuts for August 2018 follows:
Sugar Lips sells three dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4.00, with total variable cost of $1.80 per dozen. A dozen custard filled donuts sells for $8.00, with total variable cost of $3.60 per dozen.
Requirements
Calculate the weighted—average contribution margin.
Determine Sugar Lips’s monthly breakeven point in dozens of plain donuts and custard—filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of Sales Show Only two Categories of costs: variable and fixed.
Compute Sugar Lips’s margin of safety in dollars for August 2018.
Compute the degree of operating leverage for Sugar Lips Donuts. Estimate the new operating income if total sales increase by 30%. (Round the degree of operating leverage to…
Assume Annie's Homemade sells one flavor of ice cream in 6-ounce servings and 8-ounce servings. A 6-ounce serving sells for $5
and an 8-ounce serving sells for $6. The variable expense is $1.40 per 6-ounce serving and $1.80 per 8-ounce serving. The monthly
fixed expenses are $11,000. The company's most recent monthly contribution format income statement is shown below:
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Fixed expenses
Net operating income
6-Ounce
$ 24,000
6,720
$ 17,280
8-Ounce
$ 12,000
3,600
$ 8,400
Total
$ 36,000
10,320
25,680
11,000
$ 14,680
Required:
1. In the most recent month:
a. What is the company's overall contribution margin (CM) ratio?
b. What is the company's break-even point in dollar sales?
2. In the most recent month:
a. How many 6-ounce servings did the company sell?
b. How many 8-ounce servings did the company sell?
c. How many total servings did the company sell?
3. Assume next month the total number of servings remains unchanged; however, 50% of the servings…
Chapter 20 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
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Ch. 20 - Prob. 11TICh. 20 - Prob. 12TICh. 20 - Prob. 13TICh. 20 - Prob. 14TICh. 20 - Prob. 15TICh. 20 - Prob. 16TICh. 20 - Prob. 17TICh. 20 - Prob. 18TICh. 20 - A furniture manufacturer specializes in wood...Ch. 20 - For Franks Funky Sounds, straight-line...Ch. 20 - Assume Intervale Railway is considering hiring a...Ch. 20 - If Intervale Railways fixed costs total 90,000 per...Ch. 20 - If Intervale Railways fixed costs total 90,000 per...Ch. 20 - If Intervale Railways fixed costs total 90,000 per...Ch. 20 - On a CVP graph, the total cost line intersects the...Ch. 20 - If a company increases its sales price per unit...Ch. 20 - If a company increases its fixed costs for Product...Ch. 20 - Prob. 9QCCh. 20 - Rocky Mountain Waterpark sells half of its tickets...Ch. 20 - What is a variable cost? Give an example.Ch. 20 - What is a fixed cost? Give an example.Ch. 20 - What is a mixed cost? Give an example.Ch. 20 - What is the purpose of using the high-low method?Ch. 20 - Describe the three steps of the high-low method.Ch. 20 - Prob. 6RQCh. 20 - Prob. 7RQCh. 20 - Prob. 8RQCh. 20 - Prob. 9RQCh. 20 - What are the three ways contribution margin can be...Ch. 20 - Prob. 11RQCh. 20 - What is cost-volume-profit analysis?Ch. 20 - What are the CVP assumptions?Ch. 20 - What is the breakeven point?Ch. 20 - Prob. 15RQCh. 20 - Prob. 16RQCh. 20 - Prob. 17RQCh. 20 - Why is the calculation to determine the target...Ch. 20 - Prob. 19RQCh. 20 - What is sensitivity analysis? How do managers use...Ch. 20 - What effect does an increase in sales price have...Ch. 20 - Prob. 22RQCh. 20 - What is the margin of safety? What are the three...Ch. 20 - What is a companys cost structure? How can cost...Ch. 20 - What is operating leverage? What does it mean if a...Ch. 20 - Prob. 26RQCh. 20 - Philadelphia Acoustics builds innovative speakers...Ch. 20 - Hollys Day Care has been in operation for several...Ch. 20 - Mark owns a machine shop. In reviewing the shops...Ch. 20 - Glenn Company sells a product for 80 per unit....Ch. 20 - Gabelman Company sells a product for 95 per unit....Ch. 20 - Mackler, Inc. sells a product with a contribution...Ch. 20 - Ocean Company sells a product with a contribution...Ch. 20 - Compute the missing amounts for the following...Ch. 20 - Compute the missing amounts for the following...Ch. 20 - Use the following information to complete Short...Ch. 20 - Compute Funday Parks contribution margin ratio....Ch. 20 - Using the Funday Park information presented, do...Ch. 20 - Prob. 13SECh. 20 - Refer to the original information (ignoring the...Ch. 20 - Refer to the original information (ignoring the...Ch. 20 - Prob. 16SECh. 20 - For 2019, Wild Waters expects a sales mix of four...Ch. 20 - Match the following terms with the correct...Ch. 20 - Identify each cost as variable (V), fixed (F), or...Ch. 20 - For each total fixed cost listed below, determine...Ch. 20 - Prob. 21ECh. 20 - Prob. 22ECh. 20 - The manager of Trusty Car Inspection reviewed the...Ch. 20 - For its top managers, Worldwide Travel formats its...Ch. 20 - Complete the table below for contribution margin...Ch. 20 - Prob. 26ECh. 20 - Prob. 27ECh. 20 - Owner Shan Mu is considering franchising her...Ch. 20 - Prob. 29ECh. 20 - Prob. 30ECh. 20 - Determine how each change effects the elements of...Ch. 20 - Mi Tierra Driving School charges 680 per student...Ch. 20 - Prob. 33ECh. 20 - Robbies Repair Shop has a monthly target profit of...Ch. 20 - Prob. 35ECh. 20 - Prob. 36ECh. 20 - The budgets of four companies yield the following...Ch. 20 - England Productions performs London shows. The...Ch. 20 - Crandall Company sells flags with team logos....Ch. 20 - Prob. 40APCh. 20 - The contribution margin income statement of Sugar...Ch. 20 - The budgets of four companies yield the following...Ch. 20 - Famous Productions performs London shows. The...Ch. 20 - White Company sells flags with team logos. White...Ch. 20 - Diversified Investor Group is opening an office in...Ch. 20 - The contribution margin income statement of...Ch. 20 - Prob. 48PCh. 20 - The Jacksonville Shirt Company makes two types of...Ch. 20 - Prob. 1TIATCCh. 20 - Steve and Linda Hom live in Bartlesville,...Ch. 20 - Prob. 1EI
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Horngren's Financial & Managerial Accounting, The Financial Chapters (6th Edition)
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