COST MANAGEMENT (W/CONNECT ACCESS)(LOOS
COST MANAGEMENT (W/CONNECT ACCESS)(LOOS
8th Edition
ISBN: 9781260722611
Author: BLOCHER
Publisher: MCG
Question
Book Icon
Chapter 9, Problem 39P

1.

To determine

Determine the annual breakeven point in units and dollars.

1.

Expert Solution
Check Mark

Explanation of Solution

Compute the breakeven point in units:

Break-even point in units} = Total fixed expenses(Sales priceTotalper unit variable cost)$296,100$84$63=$296,100$21=14,100 unit

Compute the breakeven point in dollars:

Break-even point in dollars} = (Break even sales in dollars×Sales price)= 14,100×$84=$1,184,000 

Compute the contribution margin ratio:

Contribution margin ratio} = Sales priceVariable costSales price$84$63$84=$21$84=25%

2.

To determine

Determine the amount of sales in units and dollars.

2.

Expert Solution
Check Mark

Explanation of Solution

Compute the amount of sales in units:

Sales in units} = Total fixed expenses+Profit(Sales priceTotalper unit variable cost)$296,100+$30,000$84$63=$326,100$21=15,529 units

Compute the amount of sales in dollars:

Sales in dollars} = (Required sales in units × Selling price per unit)= 15,529 units ×$84= $1,304,436

3.

To determine

Determine the amount of sales in units and dollars, when income tax rate is 40%.

3.

Expert Solution
Check Mark

Explanation of Solution

Compute the required sales in unit:

Sales in units} = Total fixed expenses+Targeted Profit(Sales priceTotalper unit variable cost)$296,100+$50,000$84$63=$346,100$21=16,481 units

Working notes:

Determine the targeted profit:

Targeted profit} = After tax profit(1t)$30,000(10.4)$50,000

Compute the required sales in dollars:

Required sales} = (Required sales volume, in units × selling price per unit)16,481×$84$1,384,404

4.

To determine

Prepare a contribution income statement.

4.

Expert Solution
Check Mark

Explanation of Solution

Prepare the contribution income statement:

          Contribution Income Statement
ParticularsAmount
Sales   $1,384,404
Less: Variable costs ($63 per unit)                $1,038,303
Contribution margin ($21 per unit)       $346,101
Less: Fixed costs$296,100
Pre-tax  income                                       $50,001
Less: Income tax (40%)                        $20,000
Profit after tax                                         $30,001

5.

To determine

Indicate the effect of manager’s decision in operating profit of the company.

5.

Expert Solution
Check Mark

Explanation of Solution

ParticularsOriginal  (A)Incremental (A-B)After Change (B)
Sales$1,050,000$200,000$1,250,000
Less: Variable costs$787,500$150,000$937,500
Contribution margin$262,500$50,000$312,500
Less: Fixed costs$296,100$60,000$356,100
Operating profit-$33,600-$10,000-$43,600

Therefore, the operating profit is decreased by $10,000.

6.

To determine

Indicate the effect of strategy in operating profit of the company.

6.

Expert Solution
Check Mark

Explanation of Solution

ParticularsOriginal  (A)Change               (A-B)New (B)
Sales$1,050,000$131,250$1,181,250
Less: Variable costs$787,500$196,875$984,375
Contribution margin$262,500-$65,625$196,875
Less: Fixed costs$296,100$40,000$336,100
Operating income (loss)-$33,600-$105,625-$139,225

Therefore, the operating profit is decreased by $105,525.

7.

To determine

Indicate whether the change is desirable or not.

7.

Expert Solution
Check Mark

Explanation of Solution

The proposed change is considered to be desirable. The total amount of deduction in variable cost is $62,500 and the increase in fixed cost is $50,000. Hence, the total amount of net savings is $12,500.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Covered member’s independence is impaired with respect to an attest client. What is a covered member for a CPA? What are the sources of liability for an auditor who violates the rules of professional conduct in an audit engagement?
Monty Inc., a major retailer of high-end office furniture, operates several stores and is a publicly traded company. The company is currently preparing its statement of cash flows. The comparative statement of financial position and income stetement for Monty as at May 31, 2020, are as The rollowing is additional Informacon soous transectons cunne tie year shoes may sa, coat for Monty ancy which tohows arks. Plant assets costing $69,000 were purchased by paying $47,000 in cash and issuing 5,000 common shares. In order to supplement is casn, Monty Issued ,000 edditone common snares. Cash dividends of $35,000 were declared and paid at the end of the fiscal year create cashflow direct method statement
Bonita Industries reports the following ledger account balances at June 30, 2025: Cash $1158 Accounts receivable 2838 Inventory 3384 Prepaid rent 104 Equipment 320 Accumulated depreciation-equipment 66 Accounts payable 920 Unearned rent revenue 144 Common stock 220 Retained earnings 6740 Service revenue 392 Interest revenue 80 Salaries and wages expense 200 Insurance expense 98 Assuming that all of the accounts have normal balances, what are total credits on the company's trial balance at June 30, 2025? A. $8562. B. $8586. C. $8496. D. $8482.
Knowledge Booster
Background pattern image
Similar questions
SEE MORE QUESTIONS
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education