Share
Explore BrainMass

# Contribution income statement, breakeven point

1. Travelers aid most recent income statement follows:
Total Per unit
Sales (3000 units) \$90,000 \$30.00
Variables expenses \$54,000 \$18.00
Contribution margin \$36,000 \$12.00
Fixed expenses \$22,000
Net operating income \$14,000
Prepare a new contribution format income statement under the following condition:
The sales volume increases by 150 units. (New sales are 3,150 units)

2. Housewares Inc. distributes a single product, food processors whose selling price is \$200.00 and whose variable cost is \$140.00 per unit. The company's monthly fixed expense is \$18,000.

a. What is the company's breakeven point in unit sales using the equation method? Show calculations.
b. What is the company's breakeven point in sales dollars using the contribution margin with the CM ratio? Show calculations.

3. Strong Wood Company is a distributor of patio furniture. Data concerning the next month's budget appear below:

Selling price \$ 290 per unit
Variable expenses \$ 174 per unit
Fixed expenses \$ 158,000 per month
Unit sales 1,500 units per month

a. What is the company's margin of safety? Show calculations.
b. What is the company's margin of safety as a percentage of sales? Show calculations.

4. Sharpens Inc. produces knife sets for use in commercial kitchens. They sell them for \$400 each. Selected data for the company's operations last year follow.

Units in beginning inventory 0
Units produced 3,000
Units sold 2,500
Units in ending inventory 500

Variable cost per unit
Direct materials \$ 120
Direct labor 80
Variable manufacturing overhead 40
Variable selling and administrative 20

Fixed cost:
Fixed manufacturing overhead \$ 300,000
Fixed selling and administrative \$ 200,000

a. Assume that the company uses variable costing, compute the unit cost for one knife set. Show calculations.
b. Assume that the company uses absorption costing, compute the unit cost for one knife set.

5. Soccer nets for use in professional games. They sell them for \$200 each. Selected data for the company 's last year follows:

Units in beginning inventory 0
Units produced 500
Units sold 300
Units in ending inventory 200

Variable cost per unit
Direct materials \$ 75
Direct labor 30
Variable manufacturing overhead 10
Variable selling and administrative 5

Fixed cost:
Fixed manufacturing overhead \$ 2,000
Fixed selling and administrative \$ 1,000

a. Assume that the company uses variable costing, compute the unit cost for one knife set. Show calculations.
b. Assume that the company uses absorption costing, compute the unit cost for one knife set.

#### Solution Summary

Response discusses Contribution income statement, breakeven point, margin of safety, costing methods

\$2.19