Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
197. The break-even point for the entire company is closest to:
3-182
198. If the sales mix were to shift toward Product B64P with total dollar sales remaining
constant, the overall break-even point for the entire company:
Schlender Corporation produces and sells two products. In the most recent month,
Product L40O had sales of $22,000 and variable expenses of $8,580. Product Y27L had sales of
$49,000 and variable expenses of $17,690. The fixed expenses of the entire company were
$43,950.
199. The break-even point for the entire company is closest to:
200. If the sales mix were to shift toward Product L40O with total dollar sales remaining
constant, the overall break-even point for the entire company:
3-185
201. Candice Corporation has decided to introduce a new product. The product can be
manufactured using either a capital-intensive or labor-intensive method. The manufacturing
method will not affect the quality or sales of the product. The estimated manufacturing costs of
the two methods are as follows:
The company's market research department has recommended an introductory selling price of
$30 per unit for the new product. The annual fixed selling and administrative expenses of the
new product are $500,000. The variable selling and administrative expenses are $2 per unit
regardless of how the new product is manufactured.
Required:
a. Calculate the break-even point in units if Candice Corporation uses the:
1. capital-intensive manufacturing method.
2. labor-intensive manufacturing method.
b. Determine the unit sales volume at which the net operating income is the same for the two
manufacturing methods.
c. Assuming sales of 250,000 units, what is the degree of operating leverage if the company uses
the:
1. capital-intensive manufacturing method.
2. labor-intensive manufacturing method.
d. What is your recommendation to management concerning which manufacturing method should
be used?
3-186
3-188
202. The following monthly data in contribution format are available for the MN Company and
its only product, Product SD:
The company produced and sold 300 units during the month and had no beginning or ending
inventories.
Required:
a. Without resorting to calculations, what is the total contribution margin at the break-even
point?
b. Management is contemplating the use of plastic gearing rather than metal gearing in Product
SD. This change would reduce variable expenses by $18 per unit. The company's sales manager
predicts that this would reduce the overall quality of the product and thus would result in a
decline in sales to a level of 250 units per month. Should this change be made?
c. Assume that MN Company is currently selling 300 units of Product SD per month. Management
wants to increase sales and feels this can be done by cutting the selling price by $22 per unit and
increasing the advertising budget by $20,000 per month. Management believes that these actions
will increase unit sales by 50 percent. Should these changes be made?
d. Assume that MN Company is currently selling 300 units of Product SD. Management wants to
automate a portion of the production process for Product SD. The new equipment would reduce
direct labor costs by $20 per unit but would result in a monthly rental cost for the new robotic
equipment of $10,000. Management believes that the new equipment will increase the reliability
of Product SD thus resulting in an increase in monthly sales of 12%. Should these changes be
made?
3-189
203. Guitian Corporation produces and sells a single product. The company's contribution
format income statement for June appears below:
Required:
Redo the company's contribution format income statement assuming that the company sells
5,700 units.
204. Jalonen Inc., which produces and sells a single product, has provided the following
contribution format income statement for October:
Required:
Redo the company's contribution format income statement assuming that the company sells
4,500 units.
205. Colen Corporation produces and sells a single product. In January, the company sold
1,700 units. Its total sales were $153,000, its total variable expenses were $79,900, and its total
fixed expenses were $56,800.
Required:
a. Construct the company's contribution format income statement for January in good form.
b. Redo the company's contribution format income statement assuming that the company sells
1,600 units.
206. In September, Pino Corporation sold 2,100 units of its only product. Its total sales were
$195,300, its total variable expenses were $84,000, and its total fixed expenses were $98,700.
Required:
a. Construct the company's contribution format income statement for September in good form.
b. Redo the company's contribution format income statement assuming that the company sells
2,300 units.
3-194
207. Iron Decor manufactures decorative iron railings. In preparing for next year's operations,
management has developed the following estimates:
Required:
Compute the following items:
a. Unit contribution margin.
b. Contribution margin ratio.
c. Break-even in dollar sales.
d. Margin of safety percentage.
e. If the sales volume increases by 20% with no change in total fixed expenses, what will be the
change in net operating income?
f. If the per unit variable production costs increase by 15%, and if fixed selling and administrative
expenses increase by 12%, what will be the new break-even point in dollar sales?
208. Bumpass Corporation's contribution margin ratio is 74% and its fixed monthly expenses
are $43,000. Assume that the company's sales for July are expected to be $102,000.
Required:
Estimate the company's net operating income for July, assuming that the fixed monthly expenses
do not change. Show your work!
209. The management of Paye Corporation expects sales in April to be $130,000. The
company's contribution margin ratio is 65% and its fixed monthly expenses are $54,000.
Required:
Estimate the company's net operating income for April, assuming that the fixed monthly expenses
do not change. Show your work!
210. Schlag Inc. expects its sales in January to be $111,000. The company's contribution
margin ratio is 65% and its fixed monthly expenses are $64,000.
Required:
Estimate the company's net operating income for January, assuming that the fixed monthly
expenses do not change. Show your work!
3-200
211. Parkins Company produces and sells a single product. The company's income statement
for the most recent month is given below:
There are no beginning or ending inventories.
Required:
a. Compute the company's monthly break-even point in units of product.
b. What would the company's monthly net operating income be if sales increased by 25% and
there is no change in total fixed expenses?
c. What dollar sales must the company achieve in order to earn a net operating income of $50,000
per month?
d. The company has decided to automate a portion of its operations. The change will reduce
direct labor costs per unit by 40 percent, but it will double the costs for fixed factory overhead.
Compute the new break-even point in units.
