Question

30. You have been provided with Manufacturing Company: Tollowing information regarding the ALG cost per unit $ 25 12 Sales price Variable manufacturing cost pe Variable marketing cost per un Fixed manufacturing costs Fixed administrative costs 180,000 40,000 This information is based on forec orecasted sales of 25,000 units. Required: (15 points) at are the expected operating profits for the upcoming year? (b) What is the break-even point in un (c) What is the break-even point in dou 480 000 of operating promo is desired, how many units must be sold? le) How much in sales dollars is required to generate an operating profit of $75,000? 31. For each of the following costs incurred in a manufacturing company, indicate whether e costs are (a) fixed or variable and (b) product costs or period costs by placing an 'X' in the appropriate square. (6 points) Cost Item Fixed Variable Product Period Leather used to manufacture a soccer ball Depreciation of factory machinery (straight-line Accounting salaries

Answer 1

30.

Variable cost per unit = Variable manufacturing cost per unit + variable marketing cost per unit

= 12+3

= $15

selling price per unit = $25

Contribution margin = Selling price per unit - Variable cost per unit

= 25-15

= $10

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= 10/25

= 40%

a.

Number of units sold = 25,000

sales revenue = Number of units sold x selling price per unit

= 25,000 x 25

= $625,000

fixed cost = Fixed Manufacturing costs + Fixed administrative costs

= 180,000+40,000

= $220,000

Profit = ( Sales x Contribution margin ratio ) - Fixed cost

= 625,000 x 40% - 220,000

= $30,000

b.

Break even point (in units) = Fixed cost/ Contribution margin per unit

= 220,000/10

= 22,000 units

c.

Break even point (in dollars) = Fixed cost / Contribution margin ratio

= 220,000/40%

= $550,000

d.

Number of units to be sold to earn target profit = ( Fixed cost + Desired profits)/Contribution margin per unit

= ( 220,000+80,000)/10

= 300,000/10

= 30,000 units

e.

Sales to earn target profit = ( Fixed cost + Target profit)/ Contribution margin ratio

= ( 220,000+75,000)/ 40%

= 295,000/40%

= $737,500

31.

Cost Item	Fixed	Variable	Product	Period
Leather used to manufacture a soccer ball		X	X
Depreciation of factory machinery (straight-line)	X		X
Accounting salaries	X			X

Kindly give a positive rating if you are satisfied with this solution and please ask if you have any query.

Thanks