1. Blankinship, Inc., sells a single product. The company's most recent income statement is given below.
Less variable expenses (120,000)
Contribution margin 80,000
Less fixed expenses (50,000)
Net income $ 30,000
a. Contribution margin ratio is
b. Breakeven point in total sales dollars is
c. To achieve $40,000 in net income, sales must total
d. If sales increase by $50,000, net income will increase by
2. Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000.
a. What is the breakeven point in batteries?
b. What is the margin of safety, assuming sales total $60,000?
c. What is the breakeven level in batteries, assuming variable costs increase by 20%?
d. What is the breakeven level in batteries, assuming the selling price goes up by 10%, fixed manufacturing costs decline by 10%, and other fixed costs decline by $100?
3. Bob's Textile Company sells shirts for men and boys. The average selling price and variable cost for each product are as follows:
Selling Price $28.80 Selling Price $24.00
Variable Cost $20.40 Variable Cost $16.80
Fixed costs are $38,400.
a. What is the breakeven point in units for each type of shirt, assuming the sales mix is 2:1 in favor of men's shirts?
b. What is the operating income, assuming the sales mix is 2:1 in favor of men's shirts, and sales total 9,000 shirts?
4. The following information pertains to Amigo Corporation:
Month Sales Purchases
July $30,000 $10,000
August 34,000 12,000
September 38,000 14,000
October 42,000 16,000
November 48,000 18,000
December 60,000 20,000
? Cash is collected from customers in the following manner:
Month of sale (2% cash discount) 30%
Month following sale 50%
Two months following sale 15%
Amount uncollectible 5%
? 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
a. Prepare a summary of cash collections for the 4th quarter.
b. Prepare a summary of cash disbursements for the 4th quarter.
Madzinga's Draperies manufactures curtains. A certain window requires the following:
Direct materials standard 10 square yards at $5 per yard
Direct manufacturing labor standard 5 hours at $10
During the second quarter, the company made 1,500 curtains and used 14,000 square yards of fabric costing $68,600. Direct labor totaled 7,600 hours for $79,800.
a. Compute the direct materials price and efficiency variances for the quarter.
b. Compute the direct manufacturing labor price and efficiency variances for the quarter.
Instruction and computations help you learn this.