Athletico, Inc. manufactures warm-up suits. The company's projected income for the coming year, based on sales of 160,000 units, is as follows: Sales Operating expenses: Variable expenses Fixed expenses Total expenses Net income $8,000,000 $ 2,000,000 3,000,000 5,000,000 $3,000,000 Compute Athletico's operating leverage factor, based on the budgeted sales volume for the year. Compute Athletico's required sales in dollars in order to earn income of $4,500,000 in the coming year. Show the Athletico's cost structure and indicate the percentage of the Athletico's revenue represented by each item on the income statement..

Athletico, Inc. manufactures warm-up suits. The company's projected income for the coming year, based on sales of 160,000 units, is as follows: Sales Operating expenses: Variable expenses Fixed expenses Total expenses Net income $8,000,000 $ 2,000,000 3,000,000 5,000,000 $3,000,000 Compute Athletico's operating leverage factor, based on the budgeted sales volume for the year. Compute Athletico's required sales in dollars in order to earn income of $4,500,000 in the coming year. Show the Athletico's cost structure and indicate the percentage of the Athletico's revenue represented by each item on the income statement..

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 36P: Faldo Company produces a single product. The projected income statement for the coming year, based...

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Schylar Pharmaceuticals, Inc., plans to sell 130,000 units of antibiotic at an average price of 22 each in the coming year. Total variable costs equal 1,086,800. Total fixed costs equal 8,000,000. (Round all ratios to four significant digits, and round all dollar amounts to the nearest dollar.) Required: 1. What is the contribution margin per unit? What is the contribution margin ratio? 2. Calculate the sales revenue needed to break even. 3. Calculate the sales revenue needed to achieve a target profit of 245,000. 4. What if the average price per unit increased to 23.50? Recalculate: a. Contribution margin per unit b. Contribution margin ratio (rounded to four decimal places) c. Sales revenue needed to break even d. Sales revenue needed to achieve a target profit of 245,000
Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Required: 1. Compute the unit contribution margin and the units that must be sold to break even. Suppose that 30,000 units are sold above the break-even point. What is the profit? 2. Compute the contribution margin ratio and the break-even point in dollars. Suppose that revenues are 200,000 greater than expected. What would the total profit be? 3. Compute the margin of safety in sales revenue. 4. Compute the operating leverage. Compute the new profit level if sales are 20 percent higher than expected. 5. How many units must be sold to earn a profit equal to 10 percent of sales? 6. Assume the income tax rate is 40 percent. How many units must be sold to earn an after-tax profit of 180,000?
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
ABC Company manufactures the product XE-17. The product is sold at a unit price of $70.Variable expenses are $13.50 per unit and fixed expenses are $220,000 per year.Required :a. What should be the product’s CM ratio? b. Calculate the BEP is sales dollars and in units for ABC Company. c. The manager of ABC company estimates that in the coming year, the company’s sales willincrease by $80,000 (from the current sales). How much should the net profit / loss increase/decrease if the fixed costs remain constant? d. The manager of ABC company predicts that by spending an additional $80,000 per year onadvertising and using higher quality raw material (which will in turn increase the raw materialcost per unit by $3), and increasing selling price per unit by 2% (to compensate for theincreased costs), unit sales will increase by two- thirds of the current sales units. Should thecompany go with the manager’s proposed plan? Explain your answer. (Assume that in thecurrent year, the company sold…
Klamath Company produces a single product. The projected income statement for the coming year is as follows: Sales (54,600 units @ $34) $1,856,400 Total variable cost 1,064,700 Contribution margin $ 791,700 Total fixed cost 801,850 Operating income $(10,150) Suppose that revenues are $200,000 more than expected for the coming year. What would the total operating income be?$_________
Harrison Co. expects to sell 200,000 units of its product next year, which would generate total sales of $17 million. Management predicts that pretax net income for next year will be $1,250,000 and that the contribution margin per unit will be $25. Use this information to compute next year’s total expected (a) variable costs and (b) fixed costs.
Jellico Inc.'s projected operating income (based on sales of 450,000 units) for the coming year is as follows: Total Sales $11,700,000 Total variable cost 8,190,000 Contribution margin $3,510,000 Total fixed cost 2,254,200 Operating income $1,255,800 Compute the new operating income (profit) if sales are 10% higher than expected.
Diving Wear Ltd makes neoprene wetsuits. The company’s projected income statement for the coming year is as follows: Sales (65,000 units) $15,600,000 Less: Variable costs 8,736,000 Contribution margin 6,864,000 Less: Fixed costs (incl. advertising) 4,011,744 Operating income $2,852,256 Required:(iv) Suppose actual sales revenue exceed the estimated amount on the projected incomestatement by $612,000. Without preparing a new income statement, determine theamount by which the profits are underestimated.(v) The company’s management has decided to increase the advertising budget by$140,000 and reduce the average selling price to $200. These actions will increase salesrevenues by $1 million. Will this improve the company’s financial situation? Prepare anew income statement to support your answer.
Leverage Faldo Company produces a single product. The projected income statement for the coming year, based on sales of 200,000 units, is as follows: Sales $2,000,000 Less: Variable costs 1,400,000 Contribution margin $600,000 Less: Fixed costs 450,000 Operating income $150,000 Question: How many units must be sold to earn a profit equal to 10 percent of sales?
Jellico Inc.’s projected operating income (based on sales of 450,000 units) for the coming year is as follows:Required:1. Compute: (a) variable cost per unit, (b) contribution margin per unit, (c)contribution margin ratio, (d) break-even point in units, and (e) break-even point in sales dollars.2. How many units must be sold to earn operating income of $296,400?3. Compute the additional operating income that Jellico would earn if sales were $50,000 more than expected.4. For the projected level of sales, compute the margin of safety in units, and then in sales dollars.5. Compute the degree of operating leverage. (Note: Round answer to two decimal places.)6. Compute the new operating income if sales are 10% higher than expected.
Brislin Products has a new product going on the market next year. The following data are projections for production and sales: \table[[Variable costs,$250,000
Baker Company has a product that sells for $20 per unit. The variable expenses are $12 per unit, and fixed expenses total $30,000 per year. Compute for the following:c. If total sales increase by $20,000 and fixed expenses remain unchanged, by how much would net operating income be expected to increase?d. The marketing manager wants to increase advertising by $6,000 per year. How many additional units would have to be sold to increase overall net operating income by $2,000?