Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Chapter 7, Problem 7.22AE
To determine
To compute: The number of packages required to sell to generate $22,000 in operating income.
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S20-7 Calculating breakeven point in units, contribution margin ratio given
Learning Objective 3
Ocean Company sells a product with a contribution margin ratio of 80%. Fixed
costs are $2,800 per month. What amount of sales (in dollars) must Ocean
Company have to break even? If each unit sells for $30, how many units must be
sold to break even?
FunTime Cruiseline offers nightly dinner cruises departing from several cities on the east-
ern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner
cruise tickets sell for $50 per passenger. FunTime Cruiseline's variable cost of providing
the dinner is $30 per passenger, and the fixed cost of operating the vessels (depreciation,
salaries, docking fees, and other expenses) is $210,000 per month. The company's rel-
evant range extends to 20,000 monthly passengers.
c03 Use target costing to analyze data (Learning Objective 2)
See the Winter Sports Inc. data from S8-2. Assume that Winter Sports' reputation has
diminished and other resorts in the vicinity are charging only $65 per lift ticket. Winter
Sports has become a price-taker and won't be able to charge more than its competitors.
At the market price, Winter Sports' managers believe they will still serve 750,000 skiers
and snowboarders each season.
1. If Winter Sports can't reduce its costs, what profit will it earn? State your answer in
dollars and as a percent of assets. Will investors be happy with the profit level? Show
your analysis.
2. Assume that Winter Sports has found ways to cut its fixed costs to $30 million. What
is its new target variable cost per skier/snowboarder? Assume investors want to earn
a 15% return on assets. Compare this to the current variable cost per skier/
snowboarder. Comment on your results.
Chapter 7 Solutions
Managerial Accounting (5th Edition)
Ch. 7 - (Learning Objective 1) The contribution margin is...Ch. 7 - (Learning Objective 1) The contribution margin...Ch. 7 - (Learning Objective 2) The formula to find the...Ch. 7 - Prob. 4QCCh. 7 - Prob. 5QCCh. 7 - Prob. 6QCCh. 7 - (Learning Objective 4) Which of the following is...Ch. 7 - Prob. 8QCCh. 7 - Prob. 9QCCh. 7 - Prob. 10QC
Ch. 7 - Compute unit contribution margin and contribution...Ch. 7 - Prob. 7.2SECh. 7 - Prob. 7.3SECh. 7 - Find target profit volume (Learning Objective 2)...Ch. 7 - Prob. 7.5SECh. 7 - Prob. 7.6SECh. 7 - Prob. 7.7SECh. 7 - Prob. 7.8SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Calculate breakeven and target profit sales...Ch. 7 - Prob. 7.12SECh. 7 - Prob. 7.13SECh. 7 - Prob. 7.14SECh. 7 - Compute margin of safety (Learning Objective 5)...Ch. 7 - Compute and use operating leverage factor...Ch. 7 - Prob. 7.17SECh. 7 - Prob. 7.18SECh. 7 - Prepare contribution margin income statements...Ch. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.22AECh. 7 - Prob. 7.23AECh. 7 - Prob. 7.24AECh. 7 - Prob. 7.25AECh. 7 - Prob. 7.26AECh. 7 - Sustainability and CVP concepts (Learning...Ch. 7 - Prob. 7.28AECh. 7 - Calculate contribution margin and breakeven...Ch. 7 - Prob. 7.30AECh. 7 - Extension of E7-30A: Multiproduct firm (Learning...Ch. 7 - Prob. 7.32AECh. 7 - Breakeven and an advertising decision at a...Ch. 7 - Prob. 7.34AECh. 7 - Prob. 7.35AECh. 7 - Prob. 7.36AECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.39AECh. 7 - Prob. 7.40BECh. 7 - Work backward to find missing information...Ch. 7 - Find breakeven and target profit volume (Learning...Ch. 7 - Prob. 7.43BECh. 7 - Prob. 7.44BECh. 7 - Prob. 7.45BECh. 7 - Prob. 7.46BECh. 7 - Continuation of E7-46B: Changing business...Ch. 7 - Sustainability and CVP (Learning Objective 3)...Ch. 7 - Prob. 7.49BECh. 7 - Prob. 7.50BECh. 7 - Prob. 7.51BECh. 7 - Prob. 7.52BECh. 7 - Find breakeven for a multiproduct firm (Learning...Ch. 7 - Breakeven and an advertising decision at a...Ch. 7 - Compute margin of safety and operating leverage...Ch. 7 - Use operating leverage factor to find fixed costs...Ch. 7 - Prob. 7.57BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Prob. 7.59BECh. 7 - Comprehensive CVP analysis (Learning Objectives 1,...Ch. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.62APCh. 7 - Prob. 7.63APCh. 7 - Prob. 7.64APCh. 7 - Prob. 7.65APCh. 7 - Prob. 7.66APCh. 7 - Find missing data in CVP relationships (Learning...Ch. 7 - Prob. 7.68BPCh. 7 - Comprehensive CVP problem (Learning Objectives 1,...Ch. 7 - Prob. 7.70BPCh. 7 - Prob. 7.71BPCh. 7 - CVP analysis at a multiproduct firm (Learning...Ch. 7 - Prob. 7.73SCCh. 7 - Discussion Questions 1. Define breakeven point....Ch. 7 - Prob. 7.75ACTCh. 7 - Prob. 7.76ACTCh. 7 - Prob. 7.77ACT
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- Required information Learning Objective 05-P2: Compute the break-even point for a single-product company. A company's break-even point for a period is the sales volume at which total revenues equal total costs. To compute a break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio. Cost-Volume-Profit Chart Dollars Maximum productive capacity = 1,800 units Sales = $180,000 $1800,000 $160,000 $140,000 $120,000 $100,000 Largest Income = $30,000 $80,000 Maximum productive capacity = 1,800 units Break-Even Point (sales of 800 units or $80,000) Total Sales Total Costsarrow_forwardLearning Objective 05-P2: Compute the break-even point for a single-product company. Skip to question A company’s break-even point for a period is the sales volume at which total revenues equal total costs. To compute a break-even point in terms of sales units, we divide total fixed costs by the contribution margin per unit. To compute a break-even point in terms of sales dollars, divide total fixed costs by the contribution margin ratio. Cost-Volume-Profit Chart Current Time 0:00 / Duration 1:56 1x Knowledge Check 01 Based on a CVP graph, select the correct drop-down answer for each question.arrow_forwardLearning Tasks A. Discussion Questions: 1. Explain why a contribution margin per unit becomes profit per unit above the breakeven point. 2. Suppose a firm with a contribution margin percentage of 30% increased its advertising expenses by P10,000 and found that sales increased by P 30,000. Was it a good decision to increase advertising expenses? Suppose that the contribution margin ratio is now 40%. Would it be a good decision to increase advertising expense? B. Fill in the blanks for each of the following independent cases. Case Revenues Variable Cost Fixed Cost Total Costs Operating Contribution Income Margin Percentage A P500 P- P800 P1,200 2,000 1,000 В 300 200 C 700 1,000 ---- ---- 1,500 300 40% Assessment Taskarrow_forward
- a. How many pupils do Hannah and Kathleen need to enrell in their class to break even? Contribution Margin per unit = Sales per price-Variable Cost per unit 3D75-12 = 63 per unit %3D Break-even Volume Fixed Cost/Contribution Margin per unit =D1,700/63 per unit %3D = 26.98 or 27 pupils %3D b. If Hannah and Kathleen want to make a profit of $5,000 for the summer, how many pupils do they need to enroll? Pupils need to be enrolled = Fixed Cost + Desired Profit Contribution Margin per unit 1.700 + 5,000/63 per unit 106.3 or 107pupils c. Hannah and Kathleen estimate that they might not be able to enrolI more than 60 pupils. If they enroll this many pupils, how much would they need to charge per pupil in order to realize their profit goal of $5,0007arrow_forwardFunTime Cruiseline offers nightly dinner cruises departing from several cities on the east- ern coast of the United States including Charleston, Baltimore, and Alexandria. Dinner cruise tickets sell for $50 per passenger. FunTime Cruiseline's variable cost of providing the dinner is $30 per passenger, and the fixed cost of operating the vessels (depreciation, salaries, docking fees, and other expenses) is $210,000 per month. The company's rel- evant range extends to 20,000 monthly passengers.arrow_forwardE7-34A Compute margin of safety and operating leverage (Learning Objective 5) Terry's Towing Service has a monthly target operating income of $30,000. Variable expenses are 40% of sales, and monthly fixed expenses are $7,500. Requirements 1. Compute the monthly margin of safety in dollars if the shop achieves its income goal. 2. Express Terry's margin of safety as a percentage of target sales. 3. What is Terry's operating leverage factor at the target level of operating income? 4. Assume that the company reaches its target. By what percentage will the company's operating income fall if sales volume declines by 12%?arrow_forward
- w sion o 1om bles 56-3 Compute fixed costs per unit (Learning Objective 2) Scott Equipment produces high-quality soccer balls. If the fixed cost per ball is $3 when the company produces 15,000 balls, what is the fixed cost per ball when it produces 22,500 balls? Assume that both volumes are in the same relevant range.arrow_forwardLearning Objective Product Tango has revenue of $1,150,000, variable cost of goods sold of $850,000, variable selling expenses of $275,000, and fixed costs of $125,000, creating an operating loss of $(100,000). a. Prepare a differential analysis as of February 13 to determine if Product Tango should be continued (Alternative 1) or discontinued (Alternative 2), assuming fixed costs are unaffected by the decision. If an amount is zero, enter "0". If required, use a minus sign to indicate a loss. Differential Analysis Continue Product Tango (Alt. 1) or Discontinue Product Tango (Alt. 2) February 13 Revenues Costs: Variable cost of goods sold Variable selling and admin. expenses Fixed costs Profit (Loss) Continue Discontinue Product Product Tango Tango (Alternative 1) (Alternative 2) 1,150,000 0 -825,000 X -275,000 -125,000 100,000 X X X X X Differential Effects (Alternative 2) -1,150,000 850,000 275,000 0 -25,000 b. Determine if Product Tango should be continued (Alternative 1) or…arrow_forwardS20-5 Preparing a contribution margin income statement Learning Objective 2 Gabelman Company sells a product for $95 per unit. Variable costs are $40 per unit, and fixed costs are $2,200 per month. The company expects to sell 570 units in September. Prepare an income statement for September using the contribution margin format.arrow_forward
- of 10 O Macmillan Learning A company produces products at a cost of $35 each. Defective products cost an additional $15 each to repair. The probability of no defective products is 80%. The probability of 5% defective products is 20%. What is the expected cost of producing 700 products? (Use decimal notation. Give your answer to two decimal places.) expected cost: $arrow_forwardhttps://elearn.squ.edu.om/mod/quiz/attempt.php?attempt=1863256&cmid%3D886247 (SQU E-LEARNING SYSTEM (ACADI Managerial Accounting - Spring 34:29 úall á Jl Company XYZ is currently making sales of $200,000. At this level, the variable expenses were $160,000. Assume that company XYZ expects sales to increase to $250,000 in the coming period with no change is expected to fixed ?expenses. How much is the expected change in profit Increase by 40,000 .a Increase by $160,000 .b O E Increase by $50,000 .c O Increase by $10,000 .d O Cannot be determined .e Oarrow_forwardageNOWv2 | Online teachin X + m/ilrn/takeAssignment/takeAssignmentMain.do?invoker=&takeAssignmentSession Locator=&inprogress... A F Variable costs as a percentage of sales for Lemon Inc. are 72%, current sales are $610,000. and fixed costs are $191,000. How much will income from operations change if sales increase by $48,900? Oa. $13,692 decrease Ob. $13,692 increase Oc. $35,208 decrease. Od. $35,208 increase D Q 10+arrow_forward
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