(a)
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.
The breakeven point in units and in sales amount if the selling price is increased to
Answer to Problem 6E
The breakeven point in units is
Explanation of Solution
Contribution Margin Income Statement
Particulars | Amount | |
Sales Price |
||
Variable Cost per Canoe |
||
Contribution Margin |
The break-even point in units is calculated as:
The break-even point in sales is calculated as:
(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.
Margin of Safety:
The margin of safety is the margin enjoyed by the company which is achieved over and above the breakeven sales. It is a difference of actual sales and breakeven sales.
To compute:
The margin safety in units and percentage of sales if the sales price is
Answer to Problem 6E
The margin safety in units and percentage of sales is
Explanation of Solution
The actual sales amount to
The breakeven sales amount to
The margin of safety in terms of units is calculated as:
The margin of safety in terms of percentage of sales is calculated as:
(c)
Concept introduction:
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 number of canoes to be sold to achieve target profit of
Answer to Problem 6E
The target sale point in units is
Explanation of Solution
Contribution Margin Income Statement
Particulars | Amount | |
Sales Price |
||
Variable Cost per Canoe |
||
Contribution Margin |
The number units to be sold for achieving the target profit are calculated as:
The sales for achieving the target profit are calculated as:
Want to see more full solutions like this?
Chapter 6 Solutions
Managerial Accounting
- (Use information attached) Calculate the total Marginal Income and Net Profit/Loss if all the tables are sold. Use the marginal income ratio to calculate the break-even value. Calculate the new total Marginal Income and Net Profit/Loss, if an increase in advertising expense by R100 000 is expected to increase sales by 400 units. How many units must be sold if the company wishes to earn a net profit of R298 920. Based on the expected sales volume of 2 400 units, determine the sales price per unit (expressedin rands and cents) that will enable the company to break even.arrow_forwardA company would like to determine various costs and points to aid them in deciding whether to expand or not. If you are given the following information, compute the required amounts and / or figures.Selling price / unit = P100 Variable cost / unit = P70Annual fixed cost = P500,000 Compute 5. Sales in units to earn a profit of 10% of sales.arrow_forwardGiven the constant profit margin of 25%, determine the primary or net income for each SKU. Type your answers below. Note: 5th column is for RETURNS FROM CUSTOMERS due to product damages and defects. SKUS QUANTITY SELLING RETURNS NET SOLD PRICE FROM INCOME 1 SPRITE 2L 67 95.00 4 SPRITE 1.5L SPRITE 1L SPRITE 500ML SPRITE 355ML CAN CBTL COFFEE MOCHA 3-in-1 NESCAFE MOCHA LATTE 3-in-1 SAN MIG SUGAR FREE COFFEE 3-in-1 SWISS MISS DARK COCOA MIX 3-in-1 10 SWISS MISS MALLOWS COCOA MIX 3-in-1 2 101 70.00 7 3 59 50.00 4 45 25.00 70 25.00 3 42 30.00 2 7 55 15.00 3 8 90 10.00 5 9. 35 14.00 1 59 12.00 4arrow_forward
- pays for a major portion of the cost of the marketing campaign. Calculate the last row, and check whether the total profit adds up correctly! Scenario One - No Price Change- Estimation of Batt-x's Profit from Gamma-Z Revenue Car Sales from Cost per Batt-X Batt-X Batt-X Growth # of Packs Price Per Gamma-Z Battery Pack Cost Profit Profit Year Car Sales Prediction Per Car Pack (SMillion) (SMillion) (SMillion) Growth -1 18,000 20 S 500 S 180 S 410 S 148 S 32 This Year 25,000 39% 20 S 500 S 250 S 410 S 205 S 45 39% +1 35,000 40% 20 $ 500 S 350 S 369 S 258 S 92 104% +2 50,000 43% 20 S 500 ? is Total Profit 337 Note: You expect cost per battery pack reduce 10% annually for the next two years.arrow_forwardA tree provider to plant nurseries is trying to use customer lifetime value to determine the value of its customers. Two customers are shown below. Use customer lifetime value to determine the importance of each customer. Use an 8 percent discount rate. Avg. Annual Sales Avg. Profit Margin 10% $12,500 $26,000 20% Do not round intermediate calculations. Round your answers to the nearest dollar. NPV (Customer A): $ NPV (Customer B): $ What do you recommend? Customer B ✓ Customer A: Customer B: is more important. Expected Lifetime 5 years 9 yearsarrow_forwardGiven the information in the image below, please help me find the answer to each of the following indepedently:1. Calculate the total Marginal Income and Net Profit/Loss if all the tables are sold.2. Use the marginal income ratio to calculate the break-even value.3.Calculate the new total Marginal Income and Net Profit/Loss, if an increase in advertising expenseby R100 000 is expected to increase sales by 400 units.4. How many units must be sold if the company wishes to earn a net profit of R298 920. 5.Based on the expected sales volume of 2 400 units, determine the sales price per unit (expressedin rands and cents) that will enable the company to break even.arrow_forward
- Required: 1. Complete the following table. 2. Suppose Sandy Bank sells its canoes for $590 each. Calculate the contribution margin per canoe and the contribution margin ratio. 3. This year Sandy Bank expects to sell 760 canoes for $590 each. Prepare a contribution margin income statement for the company. 4. Calculate Sandy Bank's break-even point in units and in sales dollars. Sandy Bank sells its canoes for $590 each. 5. Suppose Sandy Bank wants to earn $76,000 profit this year. Calculate the number of canoes that must be sold to achieve this target. Sandy Bank sells its canoes for $590 each. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Complete the following table. Note: Round your "Cost per Unit" answers to 2 decimal places. Number of Canoes Produced and Sold Total costs Variable Costs Fixed Costs Total Costs Cost per Unit Required 3 Required 4 Variable Cost per Unit Fixed Cost per Unit Total Cost per Unit $ $ $ 500 Required 5 780 0 0.00arrow_forwardD. How many units will Marlin need to sell in order to realize a target profit of $60,720? New break-even units fill in the blank c7a1b703606305a_1 units E. What dollar sales will Marlin need to generate in order to realize a target profit of $60,720? New break-even dollars $fill in the blank c7a1b703606305a_2 Feedback F. Construct a contribution margin income statement for the month of February that reflects $230,000 in sales revenue for Marlin Motors. Income Statement $Sales Variable Costs $Contribution Margin Fixed Costs $Net Incomearrow_forwardDownload and fill out the Section 5 Comprehensive Problem Template attached below to complete the problems (ignore question 5-2 as this applies to the "combined accounting and finance" course). Problem 5-1 Redlands Inc. sells one product for $5. The variable cost per item is $3, and the fixed costs for the firm are $40. Required: a. Compute the breakeven point in units. b. Compute the number of units and sales revenue needed to achieve a $20 profit. (Ignore income taxes.) c. Assume that the income tax rate for Redlands is 40%. Compute the number of units and sales revenue needed to achieve an $18 net profit. d. Compute the number of units and sales revenue needed to achieve an 8% profit margin. (Ignore income taxes.) e. Compute the number of units and sales revenue needed to achieve a 12% net profit margin. (Assume a 40% income tax rate.) f. Assume that Redlands currently sells 40 units. Redlands estimates that if it increased sales price to $6 per unit demand would decrease by…arrow_forward
- A tree provider to plant nurseries is trying to use customer lifetime value to determine the value of its customers. Two customers are shown below. Use customer lifetime value to determine the importance of each customer. Use a 7 percent discount rate. Avg. Annual Sales Avg. Profit Margin Customer A: Customer B: $26,500 $14,000 Do not round intermediate calculans. Round your answers to the nearest dollar. NPV (Customer A): $ 25% 15% Expected Lifetime 11 years 7 years NPV (Customer B): $ What do you recommend? -Select- is more important.arrow_forwardIsland Novelties, Inc., of Palau makes two products-Hawaiian Fantasy and Tahitian Joy. Each product's selling price, variable expense per unit, and annual sales volume are as follows: Selling price per unit Variable expense per unit Number of units sold annually Hawaiian Fantasy 20 9 22,000 $ $ Tahitian Joy $ $ 110 33 6,000 Fixed expenses total $664,000 per year. Required: 1. Assuming the sales mix given above, do the following: a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole. b. Compute the company's break-even point in dollar sales. Also, compute its margin of safety in dollars and its margin of safety percentage. 2. The company has developed a new product called Samoan Delight that sells for $30 each and that has variable expenses of $24 per unit. If the company can sell 22,000 units of Samoan Delight without incurring any additional fixed expenses: a. Prepare a revised contribution format…arrow_forwardREQUIRED Study the information given below and answer the following questions independently. As far as possible, use the expanded contribution margin model to present your answers. Calculate the break-even Calculate the sales volume required to achieve an operating profit of R2 484 Suppose the management team of Timera Enterprises is considering a decrease of R18 per unit in the selling price of the product, with the expectation that this would increase the sales volume by 12%. Is this a good idea? Motivate your answer with the relevant calculations. *Determine the selling price per unit (expressed to the nearest cent) that will enable Timera Enterprises to break even. INFORMATION Timera Enterprises produces a single product. The following budgeted information for 2022 is available: Expected production and sales 45…arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education