Managerial Accounting 1B

Financial

and Managerial Accounting

Chapter 18

1.Exercise 18-5 Predicting sales and variable costs using

contribution margin L.O. C2

Orlando Company management

predicts that it will incur fixed costs of $250,000 and earn pretax income of

$350,000 in the next period. Its expected contribution margin ratio is 60%.

Required:

1.

Compute the amount of total dollar

sales.(Omit the “$” sign in your

response.)

Total dollar sales

2.

Compute the amount of total

variable costs.(Omit the “$” sign

in your response.)

Total variable costs

rev: 03-04-11

2.

Exercise 18-10 Contribution margin, break-even, and CVP chart

L.O. P2

Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The companys annual fixed costs are $630,000.

(a)

Compute the company’s contribution

margin.(Omit the “$” sign in your

response.)

Contribution margin

(b)

Compute the company’s contribution

margin ratio.(Omit the “%” sign in

your response.)

Contribution margin

ratio

(c)

Compute the company’s break-even

point in units.

Break-even point

(d)

Compute the company’s break-even point

in dollars of sales.(Omit the “$”

sign in your response.)

Break-even point

3.

Exercise 18-12 Income reporting and break-even analysis L.O. C2

Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The companys annual fixed costs are $630,000.

(1)

Prepare a contribution margin

income statement for Apollo Company at the break-even point.(Leave no cells blank – be certain to enter “0”

wherever required. Input all amounts as positive values. Omit the

“$” sign in your response.)

(2)

Assume if the companys fixed

costs increase by $135,000, what amount of sales (in dollars) is needed to

break even point?(Omit the “$”

sign in your response. )

Break-even

4.Exercise 18-13 Computing sales to achieve target income L.O. C2

Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The company targets an annual after-tax income of $840,000.

The company is subject to a 20% income tax rate. Assume that fixed costs

remain at $630,000.

(1)

Compute the unit sales to earn the

target after-tax net income.

Unit sales

(2)

Compute the dollar sales to earn

the target after-tax net income.(Omit the

“$” sign in your response.)

Dollar sales

5.

Exercise 18-15 Predicting unit and dollar sales L.O. C2

Greenspan Company management

predicts $500,000 of variable costs, $800,000 of fixed costs, and a pretax

income of $100,000 in the next period. Management also predicts that the

contribution margin per unit will be $60.

(1)

Compute the total expected dollar

sales for next period.(Omit the

“$” sign in your response.)

Total expected dollar

sales

(2)

Compute the number of units

expected to be sold next period.

Expected unit sales

6.

Exercise 18-17 CVP analysis using composite units L.O. P4

Home Builders sells windows and

doors in the ratio of 8:2 (windows:doors). The selling price of each window

is $100 and of each door is $250. The variable cost of a window is $62.50 and

of a door is $175. Fixed costs are $450,000.

(1)

Determine the selling price per

composite unit.(Omit the “$” sign

in your response.)

Selling price per

composite unit

(2)

Determine the variable costs per

composite unit.(Omit the “$” sign

in your response.)

Variable costs per

composite unit

(3)

Determine the break-even point in composite

units.

Break-even point

composite

units

(4)

Determine the number of units of

each product that will be sold at the break-even point.

Unit sales of windows

at break-even point

Unit sales of doors at

break-even point

rev: 03-04-11

7.

Problem 18-1A Contribution margin income statement and

contribution margin ratio L.O. A1

The following costs result from

the production and sale of 4,000 drum sets manufactured by Vince Drum Company

for the year ended December 31, 2011. The drum sets sell for $250 each. The

company has a 25% income tax rate.

Required:

1.

Prepare a contribution margin

income statement for the company.(Input all

amounts as positive values. Omit the “$” sign in your response.)

2.1

Compute its contribution margin

per unit.(Input all amounts as positive

values. Omit the “$” sign in your response.)

2.2

Compute its contribution margin

ratio.(Omit the “%” sign in your

response.)

Contribution margin

ratio

8.

Problem 18-7A Break-even analysis with composite units L.O. P4

National Co. manufactures and

sells three products: red, white, and blue. Their unit sales prices are red,

$55; white, $85; and blue, $110. The per unit variable costs to manufacture

and sell these products are red, $40; white, $60; and blue, $80. Their sales

mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs

shared by all three products are $150,000. One type of raw material has been

used to manufacture all three products. The company has developed a new

material of equal quality for less cost. The new material would reduce

variable costs per unit as follows: red, by $10; white, by $20; and blue, by

$10. However, the new material requires new equipment, which will increase

annual fixed costs by $20,000.

Required:

1.

Assume if the company continues to

use the old material, determine its break-even point in both sales units and

sales dollars of each individual product.(Always

round your composite units up (ceiling rounding) to next whole unit. Then use

the Sales Units to calculate Sales Dollars. Omit the “$” sign in

your response.)

Break-Even

Points

Sales

Units

Sales

Dollars

Red at break-even

White at break-even

Blue at break-even

2.

Assume if the company uses the new

material, determine its new break-even point in both sales units and sales

dollars of each individual product.(Always

round your composite units up (ceiling rounding) to next whole unit. Then use

the Sales Units to calculate Sales Dollars. Omit the “$” sign in

your response.)

Break-Even

Points

Sales

Units

Sales

Dollars

Red at break-even

White at break-even

Blue at break-even

Managerial Accounting 1BFinancial

and Managerial AccountingChapter 181.Exercise 18-5 Predicting sales and variable costs using

contribution margin L.O. C2Orlando Company management

predicts that it will incur fixed costs of $250,000 and earn pretax income of

$350,000 in the next period. Its expected contribution margin ratio is 60%.Required:1.Compute the amount of total dollar

sales.(Omit the “$” sign in your

response.) Total dollar sales2.Compute the amount of total

variable costs.(Omit the “$” sign

in your response.) Total variable costs rev: 03-04-112.Exercise 18-10 Contribution margin, break-even, and CVP chart

L.O. P2Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The companys annual fixed costs are $630,000. (a)Compute the company’s contribution

margin.(Omit the “$” sign in your

response.) Contribution margin(b)Compute the company’s contribution

margin ratio.(Omit the “%” sign in

your response.) Contribution margin

ratio(c)Compute the company’s break-even

point in units. Break-even point(d)Compute the company’s break-even point

in dollars of sales.(Omit the “$”

sign in your response.) Break-even point3.Exercise 18-12 Income reporting and break-even analysis L.O. C2Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The companys annual fixed costs are $630,000.(1)Prepare a contribution margin

income statement for Apollo Company at the break-even point.(Leave no cells blank – be certain to enter “0”

wherever required. Input all amounts as positive values. Omit the

“$” sign in your response.)(2)Assume if the companys fixed

costs increase by $135,000, what amount of sales (in dollars) is needed to

break even point?(Omit the “$”

sign in your response. ) Break-even4.Exercise 18-13 Computing sales to achieve target income L.O. C2Apollo Company manufactures a

single product that sells for $168 per unit and whose total variable costs

are $126 per unit. The company targets an annual after-tax income of $840,000.

The company is subject to a 20% income tax rate. Assume that fixed costs

remain at $630,000. (1)Compute the unit sales to earn the

target after-tax net income. Unit sales (2)Compute the dollar sales to earn

the target after-tax net income.(Omit the

“$” sign in your response.) Dollar salesGreenspan Company management

predicts $500,000 of variable costs, $800,000 of fixed costs, and a pretax

income of $100,000 in the next period. Management also predicts that the

contribution margin per unit will be $60. (1)Compute the total expected dollar

sales for next period.(Omit the

“$” sign in your response.) Total expected dollar

sales (2)Compute the number of units

expected to be sold next period. Expected unit sales6.Exercise 18-17 CVP analysis using composite units L.O. P4Home Builders sells windows and

doors in the ratio of 8:2 (windows:doors). The selling price of each window

is $100 and of each door is $250. The variable cost of a window is $62.50 and

of a door is $175. Fixed costs are $450,000. (1)Determine the selling price per

composite unit.(Omit the “$” sign

in your response.) Selling price per

composite unit (2)Determine the variable costs per

composite unit.(Omit the “$” sign

in your response.) Variable costs per

composite unit (3)Determine the break-even point in composite

units. Break-even point composite

units (4)Determine the number of units of

each product that will be sold at the break-even point. Unit sales of windows

at break-even point Unit sales of doors at

break-even pointrev: 03-04-117.Problem 18-1A Contribution margin income statement and

contribution margin ratio L.O. A1The following costs result from

the production and sale of 4,000 drum sets manufactured by Vince Drum Company

for the year ended December 31, 2011. The drum sets sell for $250 each. The

company has a 25% income tax rate. Required:1.Prepare a contribution margin

income statement for the company.(Input all

amounts as positive values. Omit the “$” sign in your response.) 2.1Compute its contribution margin

per unit.(Input all amounts as positive

values. Omit the “$” sign in your response.) 2.2Compute its contribution margin

ratio.(Omit the “%” sign in your

response.) Contribution margin

ratio8.Problem 18-7A Break-even analysis with composite units L.O. P4National Co. manufactures and

sells three products: red, white, and blue. Their unit sales prices are red,

$55; white, $85; and blue, $110. The per unit variable costs to manufacture

and sell these products are red, $40; white, $60; and blue, $80. Their sales

mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs

shared by all three products are $150,000. One type of raw material has been

used to manufacture all three products. The company has developed a new

material of equal quality for less cost. The new material would reduce

variable costs per unit as follows: red, by $10; white, by $20; and blue, by

$10. However, the new material requires new equipment, which will increase

annual fixed costs by $20,000. Required:1.Assume if the company continues to

use the old material, determine its break-even point in both sales units and

sales dollars of each individual product.(Always

round your composite units up (ceiling rounding) to next whole unit. Then use

the Sales Units to calculate Sales Dollars. Omit the “$” sign in

your response.) Break-Even

PointsSales

UnitsSales

Dollars Red at break-even White at break-even Blue at break-even 2.Assume if the company uses the new

material, determine its new break-even point in both sales units and sales

dollars of each individual product.(Always

round your composite units up (ceiling rounding) to next whole unit. Then use

the Sales Units to calculate Sales Dollars. Omit the “$” sign in

your response.) Break-Even

PointsSales

UnitsSales

Dollars Red at break-even White at break-even Blue at break-even