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Problem A-4 (continued)
4. If the postal service wants to maximize the contribution margin and
profit from sales of souvenir sheets, the new price should be:
Profit-maximizing price = 5.4663 × $0.70 = $3.83
Problem A-5 (continued)
c. The income statement is:
Sales (15,000 jackets × $90 per jacket) ..
$1,350,000
Cost of goods sold
(15,000 jackets × $40 per jacket) ........
600,000
Gross margin .........................................
750,000
Selling and administrative expenses:
Shipping .............................................
$ 60,000
Salaries ...............................................
90,000
Advertising and other ..........................
384,000
Total selling and administrative expense ..
534,000
Net operating income .............................
$ 216,000
The company’s ROI computation for the jackets is:
Net operating income Sales
ROI = ×
Sales Average operating assets
$216,000 $1,350,000
= × = 16% × 1.5 = 24%
$1,350,000 $900,000
2. Variable cost per unit:
Direct materials .......................................................
$ 9.20
Direct labor .............................................................
14.00
Variable manufacturing overhead (1/6 × $16.80) ......
2.80
Shipping expense ....................................................
4.00
Total variable cost per unit .......................................
$30.00
Problem A-6 (60 minutes)
1. Supporting computations:
Number of pads produced per year:
100,000 labor-hours ÷ 2 labor-hours per pad = 50,000 pads
