- Last month when Holiday Creations, Incorporated, sold 45,000 units, its sales, variable expenses, and fixed expenses were $180,000, $153,000, and $39,300, respectively.
Required:
What is the company’s contribution margin (CM) ratio?
What is the company’s variable expense ratio?
Note: Do not round intermediate calculations.
- Mauro Products sells a woven basket for $17 per unit. Its variable expense is $13 per unit and the company’s monthly fixed expense is $6,800.
Required:
- Calculate the company’s break-even point in unit sales.
- Calculate the company’s break-even point in dollar sales.
- Note: Do not round intermediate calculations.
- If the company’s fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales?
- Note: Do not round intermediate calculations.
- Lindon Company is the exclusive distributor for an automotive product selling for $20.00 per unit with a CM ratio of 30%. The company’s fixed expenses are $93,000 per year and it plans to sell 16,700 units this year.
Required:
- What are the variable expenses per unit?
Note: Round your “per unit” answer to 2 decimal places.
- What is the break-even point in unit sales and in dollar sales?
- What amount of unit sales and dollar sales is required to attain a target profit of $33,000 per year?
- Assume by using a more efficient shipper, the company can reduce its variable expenses by $2.00 per unit. What is the company’s new break-even point in unit sales and dollar sales? What dollar sales are required to attain a target profit of $33,000?
- Lynch Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operations:
| Variable costs per unit: | |
| Manufacturing: | |
| Direct materials | $ 11 |
| Direct labor | $ 4 |
| Variable manufacturing overhead | $ 1 |
| Variable selling and administrative | $ 1 |
| Fixed costs per year: | |
| Fixed manufacturing overhead | $ 308,000 |
| Fixed selling and administrative | $ 218,000 |
During the year, the company produced 28,000 units and sold 24,000 units. The selling price of the company’s product is $41 per unit.
Required:
- Assume the company uses absorption costing:
- Compute the unit product cost.
- Prepare an income statement for the year.
- Assume the company uses variable costing:
- Compute the unit product cost.
- Prepare an income statement for the year.