Franklin Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash. 1. Acquired $820,eee of cash from the owners. 2. Purchased $3es, eee of manufacturing equipment. The equipment has a $37,e00 salvage value and a four-year useful life. 3. The company started and completed 5,700 modems. Direct materials purchased and used amounted to $47 per unit. 4. Direct labor costs amounted to $32 per unit. 5. The cost of manufacturing supplies used amounted to $11 per unit. 6. The company paid $57,e00 to rent the manufacturing facility. 7. Franklin sold all 5,700 units at a cash price of $155 per unit. 8. The sales staff was paid a s9.se per unit sales commission. 9. Paid $46,e00 to purchase equipment for administrative offices. The equipment was expected to have a $3,700 salvage value and a three-year useful life. 18. Administrative expenses consisting of office rental and salaries amounted to $98, ee5. Required a. Use the following partially completed form to prepare an Income statement using the contribution margin format. b. Determine the break-even point in units and in dollars. c. Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed as a nercentag
Franklin Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash. 1. Acquired $820,eee of cash from the owners. 2. Purchased $3es, eee of manufacturing equipment. The equipment has a $37,e00 salvage value and a four-year useful life. 3. The company started and completed 5,700 modems. Direct materials purchased and used amounted to $47 per unit. 4. Direct labor costs amounted to $32 per unit. 5. The cost of manufacturing supplies used amounted to $11 per unit. 6. The company paid $57,e00 to rent the manufacturing facility. 7. Franklin sold all 5,700 units at a cash price of $155 per unit. 8. The sales staff was paid a s9.se per unit sales commission. 9. Paid $46,e00 to purchase equipment for administrative offices. The equipment was expected to have a $3,700 salvage value and a three-year useful life. 18. Administrative expenses consisting of office rental and salaries amounted to $98, ee5. Required a. Use the following partially completed form to prepare an Income statement using the contribution margin format. b. Determine the break-even point in units and in dollars. c. Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed as a nercentag
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Franklin Modems, Inc. makes modem cards that are used In notebook computers. The company completed the following transactions
during year 1. All purchases and sales were made with cash.
1. Acquired $820,000 of cash from the owners.
2. Purchased $305,900 of manufacturing equipment. The equipment has a $37,000 salvage value and a four-year useful life.
3. The company started and completed 5,700 modems. Direct materials purchased and used amounted to $47 per unit.
4. Direct labor costs amounted to $32 per unit.
5. The cost of manufacturing supplies used amounted to $11 per unit.
6. The company paid $57,800 to rent the manufacturing facility.
7. Franklin sold all 5,70e units at a cash price of $155 per unit.
8. The sales staff was paid a $9.50 per unit sales commission.
9. Paid $46,eee to purchase equipment for administrative offices. The equipment was expected to have a $3,700 salvage value and a
three-year useful life.
10. Administrative expenses consisting of office rental and salaries amounted to $90, 005.
Requlred
a. Use the following partlally completed form to prepare an Income statement using the contribution margin format.
b. Determine the break-even polnt in units and In dollars.
c. Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed
as a percentage.
Transcribed Image Text:FRANKLIN MODEMS, INC.
Income Statement
For the Year Ended December 31, Year 1
Sales revenue
$ 883,500
Variable costs:
Total variable costs
Contribution margin
316,350
Fixed costs:
Total fixed costs
Net income
88,245
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