Question

Coffee Perfection, Inc. makes two products - Dream Coffee Machine and Out-Of-This-World Coffee Machine. Selected information on the products is given below: | Dream Coffee Machine | Out-Of-This-World Coffee Machine Selling Price per unit: $1,000.00 $5,000.00 Variable expenses per unit: Production $490.00 $4,000.00 Commission (5% of selling price) $50.00 $250.00 The company has the following fixed costs: Fixed production costs Advertising expense Administrative salaries Per Month $650,000 1,000,000 400,000 2.050.000 Total: Sales, in units, over the past two months have been as follows: Dream Coffee Machine Out-Of-This-World Coffee Machine Total February (units sold) 20,000 5,000 25,000 March (units sold) 15,000 6,000 21,000 Required: 1. Prepare contribution income statements for February and March. Use Exhibit 5-4 on page 211 as an example. 2. Compute the company's break-even point (BEP) in dollar sales for February and March. 3. To meet customer demand the company decides to use new technology for the Out-Of-This-World Coffee Machine starting in the month of April. This decision drives the production cost to $4,500 per unit. Prepare a contribution income statement for April assuming that the company had the following sales activity:

Answer 1

As per HOMEWORKLIB POLICY, I have answered first 4 sub parts.

1.) Contribution Income Statement
February	Dream Coffee Machine	Out of this world Coffee Machine	Total
Units sold (a)	20,000	5,000	25,000
Contribution per unit = Selling Price - Variable Cost (b)	460	750	1,210
Contribution (axb)	9,200,000	3,750,000	12,950,000
March	Dream Coffee Machine	Out of this world Coffee Machine	Total
Units sold (a)	15,000	6,000	21,000
Contribution per unit = Selling Price - Variable Cost (b)	460	750	1,210
Contribution (axb)	6,900,000	4,500,000	11,400,000
2.) Break Even Dollar Sales
Particulars	February	March
Sales	45,000,000	45,000,000
Less: Variable Cost	32,050,000	33,600,000
Total Contribution	12,950,000	11,400,000
Contribution Margin ratio = Contribution/ Sales *100	28.78%	25.33%
Fixed Cost	2,050,000	2,050,000
Break Even Point (in $ Sales)= Fixed Cost/ Contribution Margin ratio	7,123,552	8,092,105
3.) Contribution Income Statement
April	Dream Coffee Machine	Out of this world Coffee Machine	Total
Units sold (a)	10,000	10,500	20,500
Contribution per unit = Selling Price - Variable Cost (b)	460	250	710
Contribution (axb)	4,600,000	2,625,000	7,225,000
4.) Break Even Dollar Sales
Particulars	April
Sales	62,500,000
Less: Variable Cost	55,275,000
Total Contribution	7,225,000
Contribution Margin ratio = Contribution/ Sales *100	11.56%
Fixed Cost	2,050,000
Break Even Point (in $ Sales)= Fixed Cost/ Contribution Margin ratio	17,733,564