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50 and target
net income of $1,500,000. Compute required sales in units to achieve its targeted net income.
1320000 units
Mozena Corporation manufactures a single product. Monthly production costs incurred in the manufacturing
process are shown below for the production of 3,000 units. The utilities and maintenance costs are mixed
costs. The fixed portions of these costs are $300 and $200, respectively.
Production Costs
Correct.
Identify the above costs as variable, fixed, or mixed. Put an "X" in the column which applies and the letter
"O" if it does not. (Please put an answer in each field, do not leave any fields blank.)
Direct Materials x
o o
x
Direct labor
o o
o
Utilities
o x
o
Property taxes
x o
o
Indirect labor
x o
o
Supervisory salaries
x o
o
Maintenance
o x
o
Depreciation
x o
Correct.
$ 51700
= $10,200
= 22,500
Utilities:
= $1,500
Maintenance:
= $900
Cost to produce 5,000 units = (Variable costs per unit × 5,000 units) + Fixed cost
= $41,500 + $10,200
= $51,700
Grissom Company estimates that variable costs will be 60% of sales, and fixed costs will total $813,600. The
selling price of the product is $8.
Correct.
Compute the break-even point in (1) units and (2) dollars. (Round answers to 0 decimal places, e.g.
205,000.)
$3.20 X = $813,600
X = 254,250 units
X = .60 X + $813,600
0.40 X = $813,600
X = $2,034,000
Compute the margin of safety in (1) dollars and (2) as a ratio, assuming actual sales are $3.33 million. (Round
answers to 0 decimal places, e.g. 205,000.)
Poole Corporation has collected the following information after its first year of sales. Net sales were
$1,600,000 on 100,000 units; selling expenses $240,000 (40% variable and 60% fixed); direct materials
$511,000; direct labor $285,000; administrative expenses $280,000 (20% variable and 80% fixed);
manufacturing overhead $360,000 (70% variable and 30% fixed). Top management has asked you to do a
CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by
10% next year.
Correct.
Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for
the current year. (Assume that fixed costs will remain the same in the projected year.)
Current Year
Variable costs
1,200,000
Total variable costs
$400,000
Contribution margin
Variable costs
$476,000 $476,000
Total fixed costs
Compute the break-even point in units and sales dollars for the current year.
The company has a target net income of $310,000. What is the required sales in dollars for the company to meet its
target?
$ 3144000
If the company meets its target net income number, by what percentage could its sales fall before it is operating at a
loss? That is, what is its margin of safety ratio? (Round answer to 1 decimal place, e.g. 12.5.)
39.4 %
True
False
When applying the high-low method, the variable cost element of a mixed cost is calculated before the fixed cost
element.
Tru
e
Fals
e
Depreciation
Property taxes
Direct materials
$50,000
$36,000
Fixed costs are $1,500,000 and the contribution margin per unit is $150. What is the break-even point?
$10,000,000
3,750 units
10,000 units
$3,750,000
Sonoma Winery has fixed costs of $10,000 per year. Its warehouse sells wine with variable costs of 80% of its unit
selling price. How much in sales does Sonoma need to break even per year?
$2,000
$12,500
$50,000
$8,000
P18-2A
Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce
bottle to retailers, who charge customers 75 cents per bottle. For the year 2010, management estimates the
following revenues and costs.
Selling expenses-
Direct materials 430,000 65,000
fixed
Administrative
Direct labor 352,000 20,000
expenses-variable
Administrative
Manufacturing overhead-variable 316,000 60,000
expenses-fixed
Prepare a CVP income statement for 2010 based on management's estimates. (List multiple entries from
largest to smallest amounts, e.g. 10, 5, 1.)
UTECH COMPANY
Selling expenses
20,000
Administrative expenses
Contribution margin
612,000
Fixed expenses
283,000
Administrative expenses
Variable costs = 66% of sales ($1,188,000 ÷ $1,800,000) or $.33 per bottle ($.50 × 66%). Total fixed costs =
$408,000
Compute the contribution margin ratio and the margin of safety ratio. (Round answers to 0 decimal places, e.g. 30.)
$408,000 + $238,000
X = = $1,900,000
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