Chapter 21, Problem 5PSB

To determine

Concept Introduction:

Breakeven point-

Breakeven point is the point where total revenues are equal to total costs. Total cost includes fixed costs as well as variable costs. It is calculated as follows-

  $Breakevenpointinsalesdollars=Fixedcosts/Contributionmarginratio$

Requirement 1-:

To compute:

Break even points in sales dollars.

To determine

Concept Introduction:

Contribution margin income statement-

It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.

Requirement 2-:

To prepare:

Forecasted contribution margin income statement.

To determine

Concept Introduction:

Contribution margin income statement-

It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.

Requirement 3-:

To prepare:

Forecasted contribution margin income statement.

To determine

Concept Introduction:

Contribution margin income statement-

It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.

Requirement 4-:

To Explain:

To explain which product would experience greater increase in profit.

To determine

Concept Introduction:

Contribution margin income statement-

It is a statement wherein all the variable costs are deducted from the sales to get the contribution margin and after getting contribution margin, fixed expenses are deducted from contribution margin to get net income or loss.

Requirement 5-:

To Explain:

To explain the factors which might create different cost structures for two products.