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
