Please open attached file CH5 for the problem, and also use attached file P5-27A for your solution.
Calculating breakeven point for two product lines; margin of safety
The contribution margin income statement of Cosmic Donuts for March 2012follows:
Contribution Margin Income Statement
For the month of March 2012
Sales revenue $127,000
Cost of goods sold $32,400
Marketing costs 17,300
General and administrative cost 10,625 60,325
Contribution margin 66,675
Marketing costs 56,700
General and administrative cost 6,300 63,000
Operating income $3,675
Cosmic sells two dozens plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $6, with total variable cost of $2 per dozen custard-filled donuts sells for $8, with total variable cost of $5.50 per dozen.
1. Determine Cosmic's monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.
2. Compute Cosmic's margin of safety in dollars for March 2012
3. If Cosmic can increase monthly sales volume by 10% what will operating income be? (The sales mix remains uncharged.)
This solution provides a complete computation of the given accounting problem formatted in Excel.
Meyersons Bakery is considering the addition of a new line of pies to its product offerings.
Meyersons Bakery is considering the addition of a new line of pies to its product offerings. It is expected that each pie will sell for $10 and the variable cost per pie will be $3. Total fixed operating costs are expected to be $20,000. Meyerson's faces a marginal tax rate of 35%, will have interest expenses associated with this line of $3,000, and expects to sell about 2,500 pies in the first year.
a. Put together an income statement for the pie line's first year. Is the line expected to be profitable?
b. Calculate the operating break-even point in both units and dollars.
c. How many pies would Meyerson's need to sell in order to achieve earnings, before interest and taxes, of $15,000?View Full Posting Details