(a) Contribution Margin: The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company. The contribution margin ratio.

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Answer 1

Question

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

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Solve the following independent cases and label your supporting computations properly. A) The company's projected profit for the coming year is as follows: Total P 200,000' 120,000 80,000 64,000 16,000 Per Unit P 20 Sales Less: Variable Costs 12 P 8 Contribution Margin P Less: Fixed Costs Net Income 1. Compute the additional profit that the company would earn if sales were P25,000 more than expected. B) KTA sells a special type of health food at a price of P16 per pound. Last year, it purchases this food from its supplier at a cost of P12 per pound. The supplier informed KTA that its cost increases and that this product will now be priced at P14 a pound. Over the years, KTA established a steady market and intends to pass the cost increase along to its customers and also add a P1 per unit to the price for additional profit. Fixed cost for the year are not expected to change and will remain at P34,000. Income tax rate is 32%. The net income after tax last year was P24,000. 2. If KTA can…

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• Calculate the revenue needed to earn a target operating income of $102,000. • If fixed costs increase by $19,000, what decrease in variable cost per person must be achieved to maintain the breakeven point calculated in requirement 1? • The general manager at Lifețime Escapes proposes to increase the price of the package tour to $8,200 to decrease the breakeven point in units. Using information in the original problem, calculate the new breakeven point in units. What factors should the general manager consider before deciding to increase the price of the package tour?

Answer 2

Question

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

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Answer 3

Question

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

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Answer 4

Question

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

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Answer 5

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

Answer 6

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

Answer 7

Chapter 6, Problem 21E

To determine

(a)

Contribution Margin:

The margin of profit which is computed after considering the variable cost only and not the fixed costis known as contribution. In other words, it means the contribution made by selling the product after covering its variable cost to the company.

The contribution margin ratio.

Answer 8

Expert Solution

Answer to Problem 21E

The contribution margin ratio is 40%.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

Contribution Margin Ratio=Sales price−Variable costSales price=$400,000−$192,000$400,000=52%

Answer 13

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

Answer 14

To determine

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Answer 15

Expert Solution

Answer to Problem 21E

The breakeven point is $120,000.

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Explanation of Solution

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The break-even point in units is calculated as:

Breakeven Point=Fixed CostContribution Margin Ratio=$62,40052%=$120,000

Answer 20

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

Answer 21

To determine

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Answer 22

Expert Solution

Answer to Problem 21E

The target sale point is $293,077.

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Explanation of Solution

Contribution Margin Income Statement:

Particulars	Amount
Revenue	$400,000
Total variable cost ($240,000×80%)	($192,000)
Total Contribution Margin	$208,000

The contribution margin ratio is 52%.

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

Answer 27

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

Answer 28

To determine

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Answer 29

Expert Solution

Answer to Problem 21E

The sale revenue from each product is divided as per their percentage ratio product mix which amounts to $293,077. The share of sale of each product i.e. Thermos A, Thermos B, and Thermos C will be $102,577, $131,855, and $58,615 respectively.

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Explanation of Solution

The total sales for achieving the target profit are calculated as:

Target Sales=Fixed Cost+Target ProfitContribution Margin Ratio=$62,400+$90,00052%=$293,077

The share of sales of Thermos A will be $102,577($293,077×35%).

The share of sales of Thermos B will be $131,885($293,077×45%).

The share of sales of Thermos C will be $58,615($293,077×20%).

Answer 34

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Answer to Problem 21E

Explanation of Solution

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

Answer to Problem 21E

Explanation of Solution

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

Answer to Problem 21E

Explanation of Solution

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.

Answer to Problem 21E

Explanation of Solution

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Chapter 6 Solutions

Concept explainers

Videos

Answer to Problem 21E

Explanation of Solution

(b) Concept introduction: Breakeven Point: The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered. To compute: The breakeven point if the fixed cost is $62,400.

Answer to Problem 21E

Explanation of Solution

(c) Concept introduction: Target Profit: The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved. The total sales to achieve target profit of $90,000.

Answer to Problem 21E

Explanation of Solution

(d) Concept introduction: Target Profit: The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved. The sale revenue from each product to achieve target profit of $90,000.

Answer to Problem 21E

Explanation of Solution

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Chapter 6 Solutions

(b)

Concept introduction:

Breakeven Point:

The level of sales where the company is neither on profit nor loss is termed as breakeven point. In other words, that level of sales at which the fixed cost of the business is recovered.

To compute:

The breakeven point if the fixed cost is $62,400.

(c)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The total sales to achieve target profit of $90,000.

(d)

Concept introduction:

Target Profit:

The target profit is that profit which a company decides to achieve and this analysis helps in determinig the level of sales by which this target can be achieved.

The sale revenue from each product to achieve target profit of $90,000.