Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-1:
The Contribution margin per unit
Answer to Problem 19E
The Contribution margin per unit shall be $60
Explanation of Solution
The Contribution margin per unit is calculated as follows:
Contribution margin per unit = Sales Price − Variable Cost per unit
= 240-180 = 60
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-2:
The Contribution margin Ratio
Answer to Problem 19E
The Contribution margin Ratio shall be 25%
Explanation of Solution
The Contribution margin Ratio is calculated as follows:
Contribution margin Ratio = (Sales Price − Variable Cost per unit) / Sales Price
= (240-180) / 240 = 25%
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-3:
Breakeven Point in units
Answer to Problem 19E
Breakeven Point in units shall be 5,400 units
Explanation of Solution
The Breakeven Point in units is calculated as follows:
Breakeven Point = Total Fixed Cost / Contribution Margin per unit
= 324000 / 60
= 5400
Concept Introduction:
Contribution Margin:
Contribution Margin is the amount of sales after adjusting variable costs. Contribution Margin is calculated with the help of following formulas:
Breakeven point:
The Breakeven point is level of sales at which the net profit is zero. In other words, the breakeven point is the amount of sales at which there no loss and no profit. The formulas to calculate breakeven point are as follows:
Requirement-4:
Breakeven Point in Dollar
Answer to Problem 19E
Breakeven Point in Dollar shall be $1,296,000
Explanation of Solution
The Breakeven Point in Dollars is calculated as follows:
Breakeven Point (Dollars) = Total Fixed Cost / Contribution Margin Ratio
= 324000 / 25%
= 1296000
Want to see more full solutions like this?
Chapter 21 Solutions
FUND.ACCT.PRIN.(LOOSELEAF)-W/ACCESS
- L.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question: 1. Assume there is a 7% sales tax rate in Ohio, where the customer who ordered the boots is located. The sales tax on the order would be $7.63, which L.L. Bean adds to the invoice total. Is the $7.63 added to L.L. Bean's sales revenue? Why or why not?arrow_forwardExpert of general accounting answerarrow_forwardCalculate the net incomearrow_forward
- L.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question:arrow_forwardThe standard rate per direct labor hour shouldarrow_forwardL.L. Bean operates two factories that produce its popular Bean boots (also known as "duck boots") in its home state of Maine. Since L.L. Bean prides itself on manufacturing its boots in Maine and not outsourcing, backorders for its boots can be high. In 2014, L.L. Bean sold about 450,000 pairs of the boots. At one point during 2014, it had a backorder level of about 100,000 pairs of boots. L.L. Bean can manufacture about 2,200 pairs of its duck boots each day with its factories running 24/7. In 2015, L.L. Bean expects to sell more than 500,000 pairs of its duck boots. As of late November 2015, the backorder quantity for Bean Boots was estimated to be about 50,000 pairs. Question: 1. Assume that 5% of the L.L. Bean boots are returned by customers for various reasons. L. Bean has a 100% refund policy for returns, no matter what the reason. What would the journal entry be to accrue L.L. Bean's sales returns for this one pair of boots? (Note: L.L. Bean most likely will make…arrow_forward
AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,
Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSON
Intermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill Education
Financial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education