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Crimson: Break-even, contribution margin ratio, sales increa

1. Crimson manufactures decorative iron railings. In preparing for next year's operations, management has developed the following estimates:

Total Per Unit
Sales (20,000 units) $1,000,000 $50.00
Direct materials $200,000 $10.00
Direct labor $50,000 $2.50
Manufacturing overhead:
Variable $70,000 $3.50
Fixed $80,000 $4.00
Selling & administrative
Variable $100,000 $5.00
Fixed $30,000 $1.50

Compute the following items:
A) Unit contribution margin.
B) Contribution margin ratio.
C) Break-even in dollar sales.
D) If the sales volume increases by 20% with no change in total fixed expenses, what will be the change in
net operating income?

1. For 2012, Taffy Company has an acid-test ratio of 1.5 and a current ratio of 2.5. Current assets equal
$200,000, of which $10,000 is prepaid expenses. The company's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory.

Required: Calculate the inventory balance on Taffy's balance sheet.

Solution Summary

Your tutorial is attached showing the procedure for each situation and notes to guide you. The ratio requires working backwards to solve the missing piece.