Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Direct Material Direct Labour Variable Manufacturing Overhead $48 Variable expenses per unit: $58 $74 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. b) Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. c) Calculate Benoits break-even point in units and in sales dollars. d) Calculate the margin of safety in units and in sales dollars.
Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following information to a single part which is used in the production of a wind instrument. The business earned Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under pressure from shareholders to increase operating income in 2020 and is therefore considering the implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for variable cost per unit and total fixed costs were as follows: Direct Material Direct Labour Variable Manufacturing Overhead $48 Variable expenses per unit: $58 $74 Fixed expenses: Fixed Manufacturing Overhead Fixed Selling Costs $215,000 $65,000 $160,000 Fixed Administrative Costs Required: a) Compute the selling price per unit in 2019, using the equation method. b) Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin income statement for the year ended December 31, 2019, detailing the components of total fixed costs and clearly showing contribution and net income. c) Calculate Benoits break-even point in units and in sales dollars. d) Calculate the margin of safety in units and in sales dollars.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Benoit Manufacturing Company manufactures and sells parts for various musical gadgets. The following
information to a single part which is used in the production of a wind instrument. The business earned
Operating Income of $220,000 in 2019, when production was 3,000 units and the president of Darius is under
pressure from shareholders to increase operating income in 2020 and is therefore considering the
implementation of strategies mainly geared at increasing revenues and or decreasing variable costs. Data for
variable cost per unit and total fixed costs were as follows:
Variable expenses per unit:
Direct Material
$58
Direct Labour
$74
Variable Manufacturing Overhead $48
Fixed expenses:
Fixed Manufacturing Overhead
Fixed Selling Costs
$215,000
$65,000
$160,000
Fixed Administrative Costs
Required:
a)
Compute the selling price per unit in 2019, using the equation method.
b)
Given the sales of 3,000 units and the selling price calculated in (a), prepare a contribution margin
income statement for the year ended December 31, 2019, detailing the components of total fixed costs
and clearly showing contribution and net income.
c)
Calculate Benoit's break-even point in units and in sales dollars.
d)
Calculate the margin of safety in units and in sales dollars.
The President of Benoit is under pressure from shareholders to increase operating income by 50% in
2020. Management expects per unit data and total fixed costs to remain the same in 2020. Compute
the number of units that would have to be sold in 2020 to reach the shareholders desired profit level. Is
this a realistic goal?
e)
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