Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 20,000 units at...
Jay-Zee Company makes an in-car navigation system. Next year, Jay-Zee plans to sell 20,000 units at a price of $360 each. Product costs include:
| Direct materials | $76.00 |
| Direct labor | $43.00 |
| Variable overhead | $11.00 |
| Total fixed factory overhead | $698,400 |
Variable selling expense is a commission of 5 percent of price; fixed selling and administrative expenses total $117,800.
Required:
1. Calculate the sales commission per unit
sold. If required, round your answers to the nearest dollar. Use
rounded answers in subsequent computations.
$ per unit
Calculate the contribution margin per unit.
$ per unit
2. How many units must Jay-Zee Company sell to
break even? Round your answer to the nearest whole number.
units
Prepare an income statement for the calculated number of units. If an amount is zero, enter "0". Do NOT round Break-even units and, if required, round your answer to the nearest dollar.
| Jay-Zee Company | |
| Income Statement | |
| $ | |
| $ | |
| $ | |
3. Calculate the number of units Jay-Zee
Company must sell to achieve target operating income (profit) of
$384,144. Round your answer to the nearest whole number.
units
4. What if the
Jay-Zee Company wanted to achieve a target operating income of
$371,000? Would the number of units needed increase or decrease
compared to your answer in Requirement 3? Round your answer to the
nearest whole number.
Compute the number of units needed for the new target operating
income.
units
Homework Answers
1) Sales comission per unit = 360*5% = 18 per unit
Contribution margin per unit = 360-76-43-11-18 = 212
2) Break even point = (698400+117800)/212 = 3850 Units
Prepare an income statement for the calculated number of units. If an amount is zero, enter "0". Do NOT round Break-even units and, if required, round your answer to the nearest dollar.
| Jay-Zee Company | |
| Income Statement | |
| Sales | $1386000 |
| Variable cost | 569800 |
| Contribution margin | $816200 |
| Fixed cost | 816200 |
| Income (loss) | $0 |
3) Target unnit = (816200+384144)/212 = 5662 Units
4) No of unit will decrease
No of units = (816200+371000)/212= 5600 Units
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