Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.CD
CURRENT DESIGNS
Current Designs manufactures two different types of kayaks, rotomolded kayaks and composite kayaks. The following information is available for each product line.
| Rotomolded | Composite | |
| Sales price/unit | $950 | $2,000 |
| Variable costs/unit | $570 | $1,340 |
The company’s fixed costs are $820,000. An analysis of the sales mix identifies that rotomolded kayaks make up 80% of the total units sold.
Instructions
(a) Determine the weighted-average unit contribution margin for Current Designs.
(b) Determine the break-even point in units for Current Designs and identify how many units of each type of kayak will be sold at the break-even point. (Round to the nearest whole number.)
(c) Assume that the sales mix changes, and rotomolded kayaks now make up 70% of total units sold. Calculate the total number of units that would need to be sold to earn a net income of $2,000,000 and identify how many units of each type of kayak will be sold at this level of income. (Round to the nearest whole number.)
(d) Assume that Current Designs will have sales of $3,000,000 with two-thirds of the sales dollars in rotomolded kayaks and one-third of the sales dollars in composite kayaks. Assuming $660,000 of fixed costs are allocated to the rotomolded kayaks and $160,000 to the composite kayaks, prepare a CVP income statement for each product line.
(e) Using the information in part (d), calculate the degree of operating leverage for each product line and interpret your findings. (Round to two decimal places.)
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Rossiter Fittings produces two models of pipe fittings for underwater lines. The two models (RF-12 and RF-25) have the following
characteristics, as developed by a product cost analyst
RF-12
RF-25
$ 527
$367
11,997
$ 387
Selling price per unit
Variable cost per unit
$ 307
Expected units sold per year
3,483
The total fixed costs per year for the company are $1,118,960.
Required:
a. What is the anticipated level of profits for the expected sales volumes?
b. Assuming that the product mix is the same at the break-even point, compute the break-even point in units.
c. The head of marketing agrees with the data provided by the cost analyst but believes that the sales of the RF-12 model will be
double in units from what the cost analyst predicts. The head of marketing agrees that the total unit volume is likely to be as
predicted by the cost analyst. What would be the break-even point of sales in units using the assumptions of the head of marketing?
Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below.
Basic
Basic Plus
Premium
Total
Units sold
750
450
300
1,500
Selling price
$250
$400
$800
Variable cost
$195
$285
$415
The company’s total fixed costs to produce the filtration systems are $180,700.
(a)
Determine the sales mix as a function of units sold for the three products.
Basic
Basic Plus
Premium
The sales mix as a function of units sold
%
%
%
Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast.
Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $450 $400 Variable cost of goods sold per unit (167) (192) Manufacturing margin per unit $283
$208 Variable selling expense per unit (202) (112) Contribution margin per unit $81 $96 The sales unit volume for the territories and products for the period is as follows: East Coast West
Coast Atlantic Wave 2,440 1,220 Pacific Pounder 0 1,220 Question Content Area a . Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each
territory as a whole percent, rounded to two decimal places, if required.
Chapter 6 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 6 - What is meant by CVP analysis?Ch. 6 - Provide three examples of management decisions...Ch. 6 - Prob. 3QCh. 6 - Describe the features of a CVP income statement...Ch. 6 - The traditional income statement for Wheat Company...Ch. 6 - Prob. 6QCh. 6 - What is meant by the term sales mix? How does...Ch. 6 - Prob. 8QCh. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - What is the theory of constraints? Provide some...Ch. 6 - What is meant by "cost structure? Explain how a...Ch. 6 - What is operating leverage? How does a company...Ch. 6 - Prob. 14QCh. 6 - Prob. 15QCh. 6 - Prob. 16QCh. 6 - Distinguish between absorption costing and...Ch. 6 - Prob. 18QCh. 6 - Prob. 19QCh. 6 - Prob. 20QCh. 6 - Prob. 21QCh. 6 - Prob. 22QCh. 6 - Determine missing amounts for contribution margin....Ch. 6 - Hamby Inc. has sales of 2,000,000 for the first...Ch. 6 - Prob. 6.3BECh. 6 - Prob. 6.4BECh. 6 - Prob. 6.5BECh. 6 - Prob. 6.6BECh. 6 - NoFly Corporation sells three different models of...Ch. 6 - Information for NoFly Corporation is given in...Ch. 6 - Prob. 6.9BECh. 6 - Prob. 6.10BECh. 6 - In Marshall Company, data concerning two products...Ch. 6 - Prob. 6.12BECh. 6 - Prob. 6.13BECh. 6 - Prob. 6.14BECh. 6 - Prob. 6.15BECh. 6 - Compute product costs under variable costing. (LO...Ch. 6 - Compute product costs under absorption costing....Ch. 6 - Prob. 6.18BECh. 6 - Prob. 6.19BECh. 6 - Victoria Company reports the following operating...Ch. 6 - Prob. 6.2DICh. 6 - Zoom Corporation manufactures and sells three...Ch. 6 - Prob. 6.4DICh. 6 - Prob. 6.1ECh. 6 - In the month of June, Jose Heberts Beauty Salon...Ch. 6 - Compute net income under different alternatives....Ch. 6 - Prob. 6.4ECh. 6 - Prob. 6.5ECh. 6 - Yard Tools manufactures lawnmowers, weed-trimmers,...Ch. 6 - PDQ Repaint has 200 auto-maintenance service...Ch. 6 - Express Delivery is a rapidly growing delivery...Ch. 6 - Prob. 6.9ECh. 6 - Determine break-even point in dollars for two...Ch. 6 - Mars Company manufactures and sells three...Ch. 6 - Compute contribution margin and determine the...Ch. 6 - Helena Company manufactures and sells two...Ch. 6 - The CVP income statements shown below are...Ch. 6 - Casas Modernas of Juarez, Mexico, is contemplating...Ch. 6 - Prob. 6.16ECh. 6 - Compute product cost and prepare an income...Ch. 6 - Prob. 6.18ECh. 6 - Crate Express Co. produces wooden crates used for...Ch. 6 - Midlands Inc. had a bad year in 2016. For the...Ch. 6 - Lorge Corporation has collected the following...Ch. 6 - Determine break-even sales under alternative sales...Ch. 6 - Prob. 6.4APCh. 6 - The following CVP income statements are available...Ch. 6 - Bonita Beauty Corporation manufactures cosmetic...Ch. 6 - Prepare income statements under absorption costing...Ch. 6 - Dilithium Batteries is a division of Enterprise...Ch. 6 - CURRENT DESIGNS Current Designs manufactures two...Ch. 6 - Prob. 6.1BYPCh. 6 - Managerial Analysis For nearly 20 years,...Ch. 6 - Real-World Focus In a recent report, the Del Monte...Ch. 6 - The June 8, 2009, edition of the Wall Street...Ch. 6 - Prob. 6.6BYPCh. 6 - Ethics Case Brett Stem was hired during January...Ch. 6 - Prob. 6.9BYP
Additional Business Textbook Solutions
Find more solutions based on key concepts
Indicate what impact ( for increase; for decrease) the following transactions would have on the accounting equa...
Principles of Accounting Volume 1
West Island distributes a single product. The companys sales and expenses for the month of June are shown. Usin...
Principles of Accounting Volume 2
Your company spent $5,000 last year on business-related meals and $2,000 on entertainment. Calculate the differ...
Construction Accounting And Financial Management (4th Edition)
Discussion Questions 1. What characteristics of the product or manufacturing process would lead a company to us...
Managerial Accounting (4th Edition)
Classification of costs, service sector. Market Focus is a marketing research firm that organizes focus groups ...
Cost Accounting (15th Edition)
E2–18 Analyzing and journalizing transactions
Learning Objective 3
Journalize the transactions of Wilk...
Horngren's Accounting (11th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Product cost method of product costing Smart Stream Inc. uses the product cost method of applying the cost-plus approach to product pricing. The costs of producing and selling 10,000 cell phones are as follows: Smart Stream desires a profit equal to a 30% return on invested assets of 1,200,000. A. Determine the amount of desired profit from the production and sale of 10,000 cell phones. B. Determine the product cost per unit for the production of 10,000 cell phones. C. Determine the product cost markup percentage for cell phones. D. Determine the selling price of cell phones.arrow_forwardGalaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products: In addition, the following sales unit volume information for the period is as follows: a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each. b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?arrow_forwardVandenberg, 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: Question Content Area 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…arrow_forward
- The XYZ Company produces and sells two products: The Riffs and The Raffs. Below is revenue and cost information to facilitate the development of a basic segmented income statement. Product Riffs Raffs Sales Price per unit $8.00 6.00 Variable Cost per unit $3.20 3.00 Traceable Fixed Costs $62,000 $44,000 It is expected that the company will incur $21,000 of common fixed expenses and unit sales are expected to be 12,000 of Riffs and 18,000 of Raffs. Required: Construct a Contribution Format Income Statement segmented by product line and company total.arrow_forwardSBD Phone Company sells its waterproof phone case for $122 per unit. Fixed costs total $262,000, and variable costs are $52 per unit. Compute the units of product that must be sold to earn pretax income of $228,000. Units to be sold to achieve targeted income Choose Numerator: Choose Denominator: Units to Achieve Target Units to achieve target IIarrow_forwardAssistance with below please Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products: Conquistador Hurricane Sales price $5,600 $3,600 Variable cost of goods sold (3,530) (2,410) Manufacturing margin $2,070 $1,190 Variable selling expenses (950) (650) Contribution margin $1,120 $540 Fixed expenses (530) (220) Operating income $590 $320 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane Sales unit volume 2,200 1,600 Question Content Area a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent. Galaxy Sports Inc.Contribution Margin by Productblank…arrow_forward
- Salvadores Manufacturing builds and sells snowboards, skis and poles. The sales price and variable cost for each follows: Product Selling Priceper Unit Variable Costper Unit Snowboards $310 $180 Skis $410 $210 Poles $50 $20 Their sales mix is reflected in the ratio 7:4:2. What is the overall unit contribution margin for Salvadores with their current product mix? Overall Unit Contribution Margin $fill in the blank 1arrow_forwardSmoky Mountain Corporation makes two types of hiking boots the Xtreme and the Pathfinder. Data concerning these two product ines appear below: Selling price per unit Direct materials per unit Direct labor per unit Direct labor-hours per unit Estimated annual production and sales Xtreme $ 120.00 $ 65.20 11.201 1.4 D 10,000 units Pathfinder $87.00 5 51.00 $8.00 1.0 65,000 unit The company has a traditional costing system in which manufacturing overhead is applied to units based on direct labor-hours. Data concerning manufacturing overhead and direct labor-hours for the upcoming year appear below: Estimated total manufacturing overhead Estimated total direct labor-hours $ 2,033,000 107,000 D Required: 1. Compute the product margins for the Xtreme and the Pathfinder products under the company's traditional costing system. 2. The company is considering replacing its traditional costing system with an activity based costing system that would assign its manufacturing overhead to the following…arrow_forwardCullumber Company makes three models of tasers. Information on the three products is given below. Sales Variable expenses Contribution margin Fixed expenses Net income (a) Net income $ (b) Shocker Net Income Tingler $300,000 $500,000 Tingler Net Income $ Total Net Income (c) Why or why not? Compute current net income for Cullumber Company. ta Net income would 151,400 148,600 $ 119,400 S $29,200 Fixed expenses consist of $298,000 of common costs allocated to the three products based on relative sales, as well as direct fixed expenses unique to each model of $30,000 (Tingler), $80,800 (Shocker), and $34,300 (Stunner). The common costs will be incurred regardless of how many models are produced. The direct fixed expenses would be eliminated if that model is phased out. James Watt, an executive with the company, feels the Stunner line should be discontinued to increase the company's net income. Shocker 197,000 303,000 229,800 $73,200 Compute net income by product line and in total for…arrow_forward
- subject:accounting ACCT 203 produces and sells lighting fixtures. An entry light has a total cost of $180 per unit, of which $100 is product cost and $80 is selling and administrative expenses. In addition, the total cost of $180 is made up of $110 variable cost and $70 fixed cost. The desired profit is $45 per unit. Determine the markup percentage on product cost.arrow_forwardVandenberg, 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…arrow_forwarderritory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Pounder Sales price $400 $350 Variable cost of goods sold per unit (148) (161) Manufacturing margin per unit $252 $189 Variable selling expense per unit (156) (91) Contribution margin per unit $96 $98 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 3,260 1,630 Pacific Pounder 0 1,630 Question Content Area a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc.Contribution Margin by…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Pricing Decisions; Author: Rutgers Accounting Web;https://www.youtube.com/watch?v=rQHbIVEAOvM;License: Standard Youtube License