3-122
140.
Fortune Tools produces and sells two products. Data concerning these products for the
most recent month appear below:
Product XYZ
Product VAR
Sales
$14,000
$27,000
Variable costs
$6,720
$12,550
Sales
Variable costs
Fixed costs
141.
142.
Drum Co. has provided the following data concerning its only product:
Selling price
$200 per unit
Current sales
18,800 units
Break-even sales
14,288 units
Required:
Compute the margin of safety in both dollars and as a percentage of sales.
Margin of safety (in dollars) (b)
$902,400
143.
144.
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145.
Grayson Corporation produces and sells a single product. Data concerning that product
appear below:
Selling price per unit
$230.00
Variable cost per unit
$92.00
Fixed cost per month
$621,000
Selling price per unit
Variable cost per unit
unit and CM ratio
146.
Morrel Co. produces and sells a single product. The company’s income statement for the
most recent month is given below:
Sales (6,000 units at $40 per
$240,000
3-128
unit)
Less manufacturing costs:
Direct materials
$48,000
Direct labor (variable)
60,000
Variable factory overhead
12,000
Fixed factory overhead
30,000
150,000
Gross margin
90,000
Less selling and other costs:
Variable selling and other
costs
24,000
Fixed selling and other costs
42,000
66,000
Operating profit
$24,000
3-131
147.
Broken Arrow Inc. produces and sells a single product. Data concerning that product
appear below:
Per Unit
Percent of Sales
Selling price
$190
100%
Variable costs
57
30%
Contribution margin
$133
70%
200 units)
New total contribution margin:
2,200 units × $121 per unit
Present total contribution margin:
2,000 units × $133 per unit
Change in total contribution margin
Less increase in advertising budget
Change in operating profit
3-132
148.
Fairmount Corporation produces and sells a single product. Data concerning that product
appear below:
Per Unit
Percent of Sales
Selling price
$120
100%
Variable costs
36
30%
Contribution margin
$84
70%
200 units)
New total contribution margin:
7,200 units × $75 per unit
Present total contribution margin:
7,000 units × $84 per unit
588,000
Change in total contribution margin
3-134
149.
3-135
150.
Volare, Inc. 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:
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Capital-
Intensive
Labor-
Intensive
Variable
manufacturing cost
per unit
$14.00
$17.60
Fixed manufacturing
cost per year
$2,440,000
$1,320,000