Question

home / study / business / accounting / accounting questions and answers / suppose that kicker had the following sales and cost experience (in thousands of dollars) for ... Question: Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May... Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year: May, Current Year May, Prior Year Total sales $43,560 $41,700 Materials (17,000) (16,000) Labor and supplies (1,400) (1,200) Commissions (1,250) (1,100) Contribution margin $23,910 $23,400 Fixed warehouse cost (680) (500) Fixed administrative cost (4,300) (4,300) Fixed selling cost (5,600) (5,000) Research and development (9,750) (4,000) Operating income $3,580 $9,600 In May of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker systems for a major automobile company. The program was housed in research and development. In the beginning of the current year, Kicker's accounting department exercised tighter control over sales commissions, ensuring that no dubious (e.g., double) payments were made. The increased sales in the current year required additional warehouse space that Kicker rented in town. Required: 1. Calculate the contribution margin ratio for May of both years. Round the ratios to four decimal places before converting to a percentage. For example, 0.88365 would be rounded to 0.8837 and entered as 88.37%. May of current year % May of prior year % 2. Calculate the break-even point in sales dollars for both years. Use the ratios computed in Requirement 1. Round your final answers to the nearest dollar. May of current year $ May of prior year $ 3. Calculate the margin of safety in sales dollars for both years. Round your final answers to the nearest dollar. May of current year $ May of prior year $

Answer 1

Answer with working note given below: