Pin Cushion Company produces two models of sewing basket. Information about Pin Cushion’s products is given below:
|
Product A |
Product B |
||||
| Sales revenue |
$ |
30,000 |
$ |
45,000 |
|
| Less: Variable costs |
|
12,200 |
|
20,600 |
|
| Contribution margin |
$ |
17,800 |
$ |
24,400 |
|
| Total units sold |
|
820 |
|
1,860 |
|
Pin Cushion’s fixed costs total $35,800.
Required:
1. Determine Pin Cushion’s weighted-average unit contribution margin and weighted-average contribution margin ratio.
2. Calculate Pin Cushion’s break-even units and break-even sales revenue.
3. Calculate the number of units of each product that must be sold to break even.
4. Calculate the total sales necessary for Pin Cushion to earn a profit of $63,600.
5. Calculate the sales revenue generated from each product line if Pin Cushion earns its target profit of $63,600.
6. Using the original information, calculate Pin Cushion’s degree of operating leverage.
Presidio, Inc., produces one model of mountain bike. Partial information for the company follows:
Required:
1. Complete Presidio’s cost data table.
2. Calculate Presidio’s contribution margin ratio and its total contribution margin at each sales level indicated in the cost data table assuming the company sells each bike for $620.
3. Calculate net operating income (loss) at each of the sales levels assuming a sales price of $620.
Consider the following information for Presidio Inc.’s most recent year of operations.
| Number of units produced |
2,700 |
|
| Number of units sold |
1,650 |
|
| Sales price per unit |
$ |
660.00 |
| Direct materials per unit |
80.00 |
|
| Direct labor per unit |
110.00 |
|
| Variable manufacturing overhead per unit |
60.00 |
|
| Fixed manufacturing overhead per unit ($319,140 ÷ 2,700 units) |
118.20 |
|
| Total variable selling expenses ($11 per unit sold) |
18,150.00 |
|
| Total fixed general and administrative expenses |
77,000.00 |
|
Required:
2-a. Complete a full absorption costing income statement for Presidio. Assume there was no beginning inventory.
2-b. Complete a variable costing income statement for Presidio. Assume there was no beginning inventory.
3. Compute the difference in profit between full absorption costing and variable costing.
Ramada Company produces one golf cart model. A partially complete table of company costs follows:
|
|
|
|
|
|
|
|
| Number of golf carts produced and sold |
|
400 |
|
600 |
|
800 |
| Total costs |
|
|
|
|
|
|
| Variable costs |
$ |
? |
$ |
444,000 |
$ |
? |
| Fixed costs per year |
|
? |
|
192,000 |
|
? |
| Total costs |
|
? |
|
636,000 |
|
? |
| Cost per unit |
|
|
|
|||
| Variable cost per unit |
|
? |
|
? |
|
? |
| Fixed cost per unit |
|
? |
|
? |
|
? |
| Total cost per unit |
|
? |
|
? |
|
? |
Required:
1. Complete the table.
2. Ramada sells its carts for $1,850 each. Prepare a contribution margin income statement for each of the three production levels given in the table.
4. Calculate Ramada’s break-even point in number of units and in sales revenue.
5. Assume Ramada sold 200 carts last year. Without performing any calculations, determine whether Ramada earned a profit last year.
6. Calculate the number of carts that Ramada must sell to earn $85,500 profit.
7. Calculate Ramada’s degree of operating leverage if it sells 650 carts.
8. Using the degree of operating leverage, calculate the change in Ramada’s profit if sales are 20 percent less than expected.