AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, CD players, and speakers. System A, of slightly higher quality than system B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A $ 45,000 20,000 25,000 System B Sales Less: Variable expenses Contribution margin Less: Fixed costs Operating income 10,000 $15,000 25,500 7,000 3,200 $ 32,500 18,000 4,800 2,700 52,100 5(11,000) Tendset 000 "This includes common fixed costs totalling $18,000, allocated to each product in proportion to its revenues. 674 The owner of the store is concerned about the profit performance of system B and is considering dropping it. If the product is dropped, sales of system A will increase by 30 percent, and sales of headsets will drop by 25 percent

AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, CD players, and speakers. System A, of slightly higher quality than system B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A $ 45,000 20,000 25,000 System B Sales Less: Variable expenses Contribution margin Less: Fixed costs Operating income 10,000 $15,000 25,500 7,000 3,200 $ 32,500 18,000 4,800 2,700 52,100 5(11,000) Tendset 000 "This includes common fixed costs totalling $18,000, allocated to each product in proportion to its revenues. 674 The owner of the store is concerned about the profit performance of system B and is considering dropping it. If the product is dropped, sales of system A will increase by 30 percent, and sales of headsets will drop by 25 percent

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 58P: Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and...

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AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A System B Headset Sales $45,000 $32,500 $8,000 Less: Variable expenses 20,000 25,500 3,200 Contribution margin $25,000 $7,000 $4,800 Less: Fixed costs * 10,000 18,000 2,700 Operating income (loss) $15,000 $(11,000) $2,100 *This includes common fixed costs totaling $18,000, allocated to each product in proportion to its revenues. The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 30%, and sales of headsets will drop by 25%. Round all…
AudioMart is a retailer of radios, stereos, and televisions. The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: System A System B Headset Sales $ 45,000 $ 32,500 $ 8,000 Less: Variable expenses 20,000 25,500 3,200 Contribution margin $25,000 $7,000 $4,800 Less: Fixed costs * 10,000 18,000 2,700 Operating income (loss) $15,000 $(11,000) $2,100 * This includes common fixed costs totaling $18,000, allocated to each product in proportion to its revenues. The owner of the store is concerned about the profit performance of System B and is considering dropping it. If the product is dropped, sales of System A will increase by 30%, and sales of headsets will drop by 25%. Round all…
The store carries two portable sound systems that have radios, tape players, and speakers. System A, of slightly higher quality than System B, costs $20 more. With rare exceptions, the store also sells a headset when a system is sold. The headset can be used with either system. Variable-costing income statements for the three products follow: SYSTEM A SYSTEM B HEADSET SALES $45,000 32,500 8,000 LESS: VARIABLE EXPENSE 20,000 25,500 3,200 CONTRIBUTION MARGIN 25,000 7,000 4,800 LESS: FIXED COSTS* 10,000 18,000 2,700 OPERATING INCOME 15,000 -11,000 2,100 * THIS INCLUDES COMMON FIXED COSTS TOTALING $18,000, ALLOCATED TO EACH PRODUCT IN PROPORTION TO ITS REVENUES. Required: Prepare segmented income statements for the three products, using a better format. CONCEPTUAL CONNECTION Prepare segmented income statements for System A and the headsets…
Tim's Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type High-quality Medium-quality ... Sales Price $500 300 Invoice Cost Sales Commission $275 $25 135 15 Three-quarters of the shop's sales are medium-quality bikes. The shop's annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.) Required: 1. Compute the unit contribution margin for each product type. 2. What is the shop's sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shop's break-even sales volume in dollars? Assume a constant sales mix. 5. How many bicycles of each type must be sold to earn a target net income of $48,750? Assume a constant sales mix.
Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 40,000 ceiling fans and 60,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $54 $12 Unit variable cost $11 $9 Direct fixed cost $20,800 $41,000 Common fixed selling and administrative expenses total $84,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?Sales mix of ceiling fans to table fans = _______ : __________ 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number. Break-even ceiling fans ______ Break-even table fans _______ 3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales…
Vandenberg, Inc., produces and sells two products: a ceiling fan and a table fan. Vandenberg plans to sell 40,000 ceiling fans and 70,000 table fans in the coming year. Product price and cost information includes: Ceiling Fan Table Fan Price $56 $17 Unit variable cost $13 $8 Direct fixed cost $21,200 $43,000 Common fixed selling and administrative expenses total $98,000. Required: 1. What is the sales mix estimated for next year (calculated to the lowest whole number for each product)?Sales mix of ceiling fans to table fans = ______ : _____ 2. Using the sales mix from Requirement 1, form a package of ceiling fans and table fans. How many ceiling fans and table fans are sold at break-even? Round your intermediate calculations and final answers to the nearest whole number. Break-even ceiling fans ______ Break-even table fans ______ 3. Prepare a contribution-margin-based income statement for Vandenberg, Inc., based on the unit sales calculated in Requirement 2. If…
Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: Product Type Sales Price Invoice Cost Sales Commission High-quality $ 500 $ 275 $ 25 Medium-quality 300 135 15 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $65,000. (In the following requirements, ignore income taxes.) Required: 1. Compute the unit contribution margin for each product type. 2. What is the shop’s sales mix? 3. Compute the weighted-average unit contribution margin, assuming a constant sales mix. 4. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.
Karera Bicycle shop sells 21-speed bicycles. For purposes of a cost-volume profit analysis, the shop owner divided sales into two-models: Model Sales Price Invoice Cost Sales Commission High-quality P10,000 P5,500 P500 Medium-quality 6,000 2,700 300 Seventy percent of the shop’s sales are medium quality bikes. The shop’s annual fixed expenses are P1,485,000. a. Compute the weighted average unit contribution margin assuming a constant sales mix. b. What is the shop’s break-even sales volume? c. How many bicycles of each model must be sold to earn a target net income of P990,000?
Tim’s Bicycle Shop sells 21-speed bicycles. For purposes of a cost-volume-profit analysis, the shop owner has divided sales into two categories, as follows: product type sales price price invoice cost sales commission high quality 1850 840 100 medium quality 920 620 40 Three-quarters of the shop’s sales are medium-quality bikes. The shop’s annual fixed expenses are $270,400. (In the following requirements, ignore income taxes.)a. What is the shop’s break-even sales volume in dollars? Assume a constant sales mix.b. How many bicycles of each type must be sold to earn a target net income of $126,750? Assume a constant sales mix.
Jansen Crafters has the capacity to produce 50,000 oak shelves per year and is currently selling 44,000 shelves for $32 each. Cutrate Furniture approached Jansen about buying 1,200 shelves for bookcases it is building and is willing to pay $26 for each shelf. No packaging will be required for the bulk order. Jansen usually packages shelves for Home Depot at a price of $1.50 per shell. The $1.50 per-shelf cost is included in the unit variable cost of $27, with annual fixed costs of $320.000. However, the $130 packaging cost will not apply in this case. The fixed costs will be unaffected by the special order and the company has the capacity to accept the order. Based on this information, what would be the profit if Jansen accepts the special order? A. Profits will decrease by $1,200. B. Profits will increase by $31,200. C. Profits will increase by $600. D. Profits will increase by $7,200.
Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The cost of placing an order is 30. The cost of holding one unit of inventory for one year is 15.00. Currently, Ottis places 160 orders of 4,000 plastic housing units per year. Required: 1. Compute the economic order quantity. 2. Compute the ordering, carrying, and total costs for the EOQ. 3. How much money does using the EOQ policy save the company over the policy of purchasing 4,000 plastic housing units per order?
Polaris Inc. manufactures two types of metal stampings for the automobile industry: door handles and trim kits. Fixed cost equals 146,000. Each door handle sells for 12 and has variable cost of 9; each trim kit sells for 8 and has variable cost of 5. Required: 1. What are the contribution margin per unit and the contribution margin ratio for door handles and for trim kits? 2. If Polaris sells 20,000 door handles and 40,000 trim kits, what is the operating income? 3. How many door handles and how many trim kits must be sold for Polaris to break even? 4. CONCEPTUAL CONNECTION Assume that Polaris has the opportunity to rearrange its plant to produce only trim kits. If this is done, fixed costs will decrease by 35,000, and 70,000 trim kits can be produced and sold. Is this a good idea? Explain.