Required: 1-a. Compute last year's CM ratio and the break-even point in balls. 1-b. Compute the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $1.50 per ball. If this change takes place and the selling price per remains constant at $30.00, what will be next year's CM ratio and the break-even point in ball balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $99,000, as last year?

Required: 1-a. Compute last year's CM ratio and the break-even point in balls. 1-b. Compute the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $1.50 per ball. If this change takes place and the selling price per remains constant at $30.00, what will be next year's CM ratio and the break-even point in ball balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $99,000, as last year?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
1. Compute (a) last year's CM ratio and the break-even point in balls, and (b) the degree of operating leverage at last year's sales level. 2. Due to an increase in labor rates, the company estimates that next year's variable expenses will increase by $3 per ball. If this change takes place and the selling price per ball remains constant at $25, what will be next year's CM ratio and the break-even point in balls? 3. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year?
1-Due to an increase in labor rates, the company estimates that variable expenses will increase by $3 per ball next year. If this change takes place and the selling price per ball remains constant at $25, what will be the new CM ratio and break-even point in balls? 2. Refer to the data in (2) above. If the expected change in variable expenses takes place, how many balls will have to be sold next year to earn the same net operating income, $90,000, as last year? 3. Refer again to the data in (2) above. The president feels that the company must raise the selling price of its basketballs. If Northwood Company wants to maintain the same CM ratio as last year, what selling price per ball must it charge next year to cover the increased labor costs?
1.) refer to the original data. Compute the company's margin of safety in both dollar and percentage terms ? 2.) what is the company's cm ratio? If he company can sell more units thereby increasing sales by $84000 per month and there is no change in fixed expense, by how much would you expect monthly net operating income to increase?
4.) refer to the orginal data. Compute the company's margin of safety in both dollar and percentage terms. 5.) what is the company's CM ratio? If the company can sell more units thereby increasing sales by $50000 per month and there is no change in fixed expenses, by how much would you expect monthly net operating income to increase?
Many times the selling price of a product p, is related to demand D, according to the relationship p=a - bD. However, a company has found that the price of their product can be related to demand (in units per year) according to the following equation: p=108.5 – 2.08D⁰.75. In addition, there is a fixed cost of P50,000 per year and the variable cost tomanufacture the product is P68 per unit. What is the level of demand which maximizes sales? What is the maximum sales? What level of demand maximizes profit? What is the maximum profit? What are the breakeven quantities of this product if p=678.39-1.08D?
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A company has a margin of safety of 25%, a contribution margin ratio of 30%, and sales of $1,000,000. a. What is the break-even point in sales dollars? $ b. What is the operating income? $ c. If neither the relationship between variable costs and sales nor the amount of fixed costs is expected to change in the next year, how much additional operating income can be earned by increasing sales by $110,000?
Due to an increase in labour rates, the company estimates that variable costs will increase by €3per ball next year. If this change takes place and the selling price per ball remains constant at€25. 1) Refer to the data in above. If the expected change in variable costs takes place, howmany balls will have to be sold next year to earn the same profit (€90,000) as last year?
The Doral Company manufactures and sells pens. Currently, 5,000,000 units are sold per year at $0.50 per unit. Fixed costs are $900,000 per year. Variable costs are $0.30 per unit. Consider each case separately: Q1. a. What is the current annual operating income? b. What is the current breakeven point in revenues? Compute the new operating income for each of the following changes: Q2. A $0.04 per unit increase in variable costs Q3. A 10% increase in fixed costs and a 10% increase in units sold Q4. A 20% decrease in fixed costs, a 20% decrease in selling price, a 10% decrease in variable cost per unit, and a 40% increase in units sold Compute the new breakeven point in units for each of the following changes: Q5. A 10% increase in fixed costs Q6. A 10% increase in selling price and a $20,000 increase in fixed costs
Kreter, Inc. earned net income of $300,000 last year. This year it wants to earn net income of $450,000. The company's fixed costs are expected to be $300,000, and variable costs are expected to be 70% of sales. Determine the required sales to meet the target net income of $450,000 using the mathematical equation. Required sales $ Using a CVP income statement format, prove your answer. Fixed costsTarget net income / (Loss)SalesVariable costsContribution margin $ Contribution marginFixed costsTarget net income / (Loss)SalesVariable costs Contribution marginSalesVariable costsFixed costsTarget net income / (Loss) Fixed costsVariable costsSalesTarget net income / (Loss)Contribution margin SalesFixed costsContribution marginVariable costsTarget net income / (Loss) $
Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year. Compute for the following:a. Total contribution margin at the break-even pointb. Contribution margin ratio for the productc. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?d. The marketing manager wants to increase advertising by $6,000 per year. How many additional units would have to be sold to increase overall net operating income by $2,000?