Requirement 1
To compute:
Break-even point for the year 2015
Requirement 1

Answer to Problem 4BPSB
Solution:
Break-even point for the year 2015 = $ 1,000,000
Explanation of Solution
The break-even point in dollars will be calculated as under −
Given,
- Sales revenue = $ 750,000
- Contribution margin = $ 150,000
- Fixed costs = $ 200,000 First, we will calculate the contribution margin ratio −
Now, the break-even point in units will be calculated as −
Thus, the break-even point in dollars has been calculated.
To compute:
Predicted break-even point for the year 2016

Answer to Problem 4BPSB
Solution:
Predicted break-even point for the year 2016 = $ 583,333
Explanation of Solution
The break-even point in dollars will be calculated as under −
Given,
- Sales revenue = $ 750,000
- Variable costs = $ 300,000 (50 % reduced due to installation of machine i.e. = $ 600,000 X 50 %)
- Fixed costs = $ 350,000 ($ 150,000 increased per year i.e. = $ 200,000 + $ 150,000) The contribution margin will be calculated as −
The contribution margin ratio −
Now, the break-even point in units will be calculated as −
Thus, the predicted break-even point in dollars has been calculated.
Requirement 3
To prepare:
A
Requirement 3

Answer to Problem 4BPSB
Solution:
Rivera Co | ||
Forecasted Contribution Margin Income statement | ||
For the year ended December 31, 2016 | ||
Sales | 750,000 | |
Less: Variable costs | 300,000 | |
Contribution Margin | 450,000 | |
Less: Fixed Costs | 350,000 | |
Net Operating Income | 100,000 |
Explanation of Solution
The contribution income statement is prepared as under −
Given,
- Sales price revenue = $ 750,000
- Variable costs = $ 300,000 (50 % reduced due to installation of machine i.e. = $ 600,000 X 50 %)
- Fixed costs = $ 350,000 ($ 150,000 increased per year i.e. = $ 200,000 + $ 150,000)
- The contribution margin is calculated as under −
- Fixed costs given as = $ 350,000
- The net operating income will be calculated as under −
The expected net operating income for Rivera Co. for the year ended December 31, 2016 = $ 100,000.
Thus, the forecasted contribution margin income statement for Rivera Co. for the year ended on December 31, 2016 has been prepared.
Requirement 4
To compute:
- The amount of sales needed to produce the target income of $ 200,000
- The number of units to be sold to produce the target income of $ 200,000
Requirement 4

Answer to Problem 4BPSB
Solution:
- The amount of sales needed to produce the target income of $ 200,000 = $ 916,667
- The number of units to be sold to produce the target income of $ 200,000 = 24,445 units
Explanation of Solution
- The target sales will be calculated as under − Given,
- Contribution margin ratio = 60%
- Fixed costs = $ 350,000
- Desired profit = $ 200,000
- The number of units to be sold to earn a target profit of $ 200,000 will be calculated as under −
The amount of sales to earn a target pre-tax income of $ 200,000 = $ 916,667
- Sales price per unit = $ 37.50 (i.e. $ 750,000 divided by 20,000 units)
- Sales = $ 916,667
Thus, the amount of sales and the number of sales units needed to produce the target income of $ 200,000 have been calculated.
Requirement 5
To prepare:
A forecasted contribution margin income statement that shows the results at the sales level = $ 916,667.
Requirement 5

Answer to Problem 4BPSB
Solution:
The
Rivera Co. | ||
Forecasted Contribution Margin Income statement | ||
For the year ended December 31, 2016 | ||
Sales | 916,667 | |
Less: Variable costs | 366,667 | |
Contribution Margin | 550,000 | |
Less: Fixed Costs | 350,000 | |
Net Operating Income | 200,000 |
Explanation of Solution
The forecasted contribution margin income statement has been prepared as under −
- Sales revenue = $ 916,667
- Variable costs will be calculated as −
- Contribution ratio = 60 %
- The contribution margin is calculated as under −
- Fixed costs given as = $ 350,000
- The net operating income will be calculated as under −
The expected net operating income for Rivera Co. for the year ended December 31, 2016 = $ 200,000.
Thus, the forecasted contribution margin income statement that shows the results at the sales level = $ 916,667 has been calculated.
Want to see more full solutions like this?
Chapter 21 Solutions
FUNDAMENTAL ACCT PRIN TEXT+CONNECT CODE
- 82. What role does assurance boundary definition play in attestation? a) Standard limits work always b) Boundaries never matter c) All areas need equal coverage d) Engagement scope limits determine verification responsibilitiesarrow_forwardCould you help me solve this financial accounting question using appropriate calculation techniques?arrow_forwardGiven solution for General accounting question not use aiarrow_forward
- How many units were started and completed with respect to direct materials during the month?arrow_forwardPlease provide the answer to this general accounting question using the right approach.arrow_forwardI am looking for help with this financial accounting question using proper accounting standards.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:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





