Kyo Company
0
20
40
60
80
100
$120
0 $50 $100 $150 $200 $250
Sales Dollars
Total
Costs
Title: Problem 21-3B
QA_Ori:
Parts 1 and 2
The scatter diagram and its estimated line of cost behavior appear below. Sales and
cost amounts are in thousands of dollars.
Part 2 Calculation of variable and fixed costs
Part 3
The estimates in Part 2 can be used to predict the total costs that will be incurred at
(‘000s) Predictions
Sales (given) $100 $170
Kyo Company
0
20
40
60
80
100
$120
0 $50 $100 $150 $200 $250
Sales Dollars
Total
Costs
QA_Edit:
Title: Problem 21-4B
QA_Ori:
Part 1 Instructor note: Use the equation in Exhibit 21.12
2013 break-even in dollar sales = Fixed costs / Contribution margin ratio
*To compute contribution margin ratio
Part 2 Instructor note: Use equation in Exhibit 21.12 with predicted numbers
2014 break-even in
dollar sales = Fixed costs / Contribution margin ratio
*To compute predicted fixed costs
$350,000
**To compute predicted contribution margin ratio
$15.00
Predicted contribution margin ratio ($37.50- $15) / $37.50) 60%
Part 3
RIVERA COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2014
Sales (20,000 x $37.50) $750,000
Part 4 Instructor note: Use equations in Exhibit 21.22 and 21.23 with predicted numbers
Required sales in dollars = (Fixed costs + Pretax income)
Contribution margin ratio
Required sales in units = (Fixed costs + Pretax income)
Contribution margin per unit
** Target after-tax income (given) $140,000
Pretax target income = After-tax target income / (1 – Tax rate)
Part 5
RIVERA COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2014
Sales (24,445 units x $37.50) $916,688
*Slightly greater than the targeted $140,000 income due to rounding of units from part 4.
Title: Problem 21-5B
QA_Ori:
Part 1 Instructor note: Use the equation in Exhibit 21.12
Break-even in dollar sales = Fixed costs / Contribution margin ratio
Product BB:
Product TT:
*To compute contribution margin ratio
Sales price per unit BB TT
Part 2
Forecasted contribution margin income statements for each product assuming sales
decline to 33,000 units with no change in unit sales price
MINGEI CO.
Forecasted Contribution Margin Income Statement
Product BB Product TT
Sales* $528,000 $ 528,000
Variable costs** 369,600 66,000
Unit sales price and variable costs are computed in Part 1 and used in these
computations:
Forecasted contribution margin income statements for each product assuming sales
increase to 64,000 units with no change in unit sales price
MINGEI CO.
Forecasted Contribution Margin Income Statement
Product BB Product TT
Sales* $1,024,000 $1,024,000
Variable costs** 716,800 128,000
Unit sales price and variable costs are computed in Part 1 and used in these
computations:
Part 4
If sales were to greatly increase, Product TT would experience the greater increase in
income because it would gain more contribution margin per unit than Product BB ($14
Part 5
Factors that could cause Product BB to have lower fixed costs include:
Labor arrangement that pays workers for units produced.
Title: Problem 21-6B
QA_Ori:
Part 1 Instructor note: Use the equation in Exhibit 21.12
Break-even in dollar sales = Fixed costs / Contribution margin ratio
*To compute contribution margin ratio
Existing
Strategy
New
Strategy
Sales price per unit $20.00
Existing strategy $16.00
New strategy [$20.00 x (1 – 20%)]
Total variable costs per unit
Part 2
BEST COMPANY
Forecasted Contribution Margin Income Statement
Existing Strategy New
Strategy
Sales* $2,000,000 $2,880,000
Variable costs** 900,000 1,296,000
Unit sales price and variable costs are computed in Part 1 and used here: