Problem 18-3B Break-even analysis; income targeting and strategy C2 A1 P2Rivera Co. sold 20,000 units of its only product and reported income of $20,000 for the current year. During a planning session for nextyear's activities, the production manager notes that variable costs can be reduced 25% by installing a machine that automates severaloperations. To obtain these savings, the company must increase its annual fixed costs by $113,000. The selling price will not change.Contribution Margin Income StatementFor Year Ended December 31Check (2) Income, $57,000Sales (20,000 × $37.50 per unit)Variable costs (20,000 × $30 per unit)Contribution marginFixed costsIncome$750,000600,000150,000130,000$ 20,000Required1. Compute the break-even point in dollar sales for next year assuming the machine is installed.2. Prepare a contribution margin income statement for next year that shows the expected results with the machine installed. Assume salesare $750,000.3. Compute the sales level required in both dollars and units to earn $87,000 of target income for next year with the machine installed.

The break even sales are calculated as fixed costs divided by contribution Margin Ratio. The…

Answered: Rivera Co. sold 20,000 units of its…

Financial & Managerial Accounting

14th Edition

ISBN:9781337119207

Author:Carl Warren, James M. Reeve, Jonathan Duchac

Publisher:Carl Warren, James M. Reeve, Jonathan Duchac

Chapter19: Cost-Volume-Profit Analysis

Section: Chapter Questions

Problem 19.17EX

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(Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30 minutes per unit. The budgeted conversion costs for the manufacturing cell are 2,700,000 per year. The total labor minutes available are 600,000. During the year, the cell was able to produce 1.5 units of the product per hour. Suppose also that production incentives exist to minimize unit product costs. Required: 1. Compute the theoretical conversion cost per unit. 2. Compute the applied conversion cost per unit (the amount of conversion cost actually assigned to the product). 3. CONCEPTUAL CONNECTION Discuss how this approach to assigning conversion costs can improve delivery time performance.
Question 2 XYZ Company produces and sells only two products since year 2000. Data concerning those products for March 2020 appear below: Product A Product B March Sales $25,000 $27,000 March Variable costs $7,000 $8,600 March Fixed costs $32,860 Required: As a Senior Manager at XYZ Company, your General Manager asked you to determine the total sales of the company in $ for product A and for product B that should be achieved to cover both variable and fixed costs for the month of March by using the company's contribution margin. The level of competition in the market was acceptable and manageable by the Company. In March, 2020, a new potential competitor is doing a market research to decide on entering the market with a product similar to Product A. The General Manager asked for your advice if the company should shift the sales mix toward Product B with no change in total sales (as the sales of product B is more than product…
Exercise 12-15 (Algo) Calculate selling price of new product with a target CM ratio LO 8, 9 Backus Inc. makes and sells many consumer products. The firm’s average contribution margin ratio is 26%. Management is considering adding a new product that will require an additional $14,000 per month of fixed expenses and will have variable expenses of $10 per unit.Required: Calculate the selling price that will be required for the new product if it is to have a contribution margin ratio equal to 26%.(Round your answer to 2 decimal places.) Calculate the number of units of the new product that would have to be sold if the new product is to increase the firm's monthly operating income by $9,700. (Round your intermediate calculations to 2 decimal places.)
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QUESTION 1 B Limited produces and sells the following three products: Product X Y Z Selling price per unit (N$) 16 20 10 Variable cost per unit(N$) 5 15 7 Contribution per unit(N$) 11 5 3 Budgeted Sales Volume (units) 50,000 10,000 100,000 The company expects the fixed costs to be N$300000, for the coming year. Assume that sales arise throughout the year in a constant mix. Required: (a)Calculate the weighted average contribution sales ratio (C/S ratio) of the products? (b)Calculate the break-even sales revenue required AND Calculate the margin of safety. (c)Calculate the amount of sales revenue required to generate a profit of N$600000. (d)Draw a multiproduct profit volume chart assuming the budget is achieved.
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Break-Even Sales and Sales to Realize Income from Operations For the current year ending October 31, Yentling Company expects fixed costs of $426,000, a unit variable cost of $40, and a unit selling price of $60. a. Compute the anticipated break-even sales (units). 110,000 X units b. Compute the sales (units) required to realize income from operations of $98,000. 154,000 X units Feedback Check My Work a. Fixed costs divided by the unit contribution margin equals break-even point in units. b. (Fixed costs + Target profit) divided by unit contribution margin = sales units.
Question 2 Two companies. The North and South sell the same type of product in the same type of market. Their budgeted profit and loss account for the year ended 31st March, 2018 were as follows: North South Sales 75,000 75,000 Variable cost 60,000 50,000 Fixed Cost 7,500 17, 500 67,500 67,500 Net Profit 7,500 7,500 You are required to: a. Calculate the break-even sales revenue of each enterprise b. State with reason which business is likely to earn greater profit in conditions of į. Heavy demand for the product and ii. Low demand for the product. c. If North Company increases its capacity by 40% and this increased fixed cost by $2,000 per annum, at what sales revenue will it make the same Net Profit as before?
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PROBLEMS Problem 1 The Norman Company predicts that 64,000 units of material will be used during the year. The materials are expected to cost P20.00 per unit. It is anticipated that it will cost P 40.00 to place each order. The annual carrying cost is P 2.00 . Determine: a. The most economical order quantity b. The total cost of ordering and carrying at the EOQ point

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