Problem 10-45 Name:
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a. Fixed factory OH costs 350,000$
Fixed regional promo. costs 50,000
Total costs to cover 400,000$
Sales 1,100,000$
Variable costs (825,000)
Contribution margin 275,000$
÷ Units sold 11,000,000
CM per unit ÷ 0.025$
Required unit sales 16,000,000
b.
Kentucky Pennsylvania Total
Sales 1,700,000$ 2,000,000$ 3,700,000$
Variable costs:
Direct material 425,000$ 500,000$ 925,000$
Direct labor 510,000 500,000 1,010,000
Factory overhead 340,000 350,000 690,000
Total 1,275,000$ 1,350,000$ 2,625,000$
Contribution margin 425,000$ 650,000$ 1,075,000$
Direct fixed costs:
Overhead 350,000$ 450,000$ 800,000$
Promotion costs 170,000 50,000 220,000
Total 520,000$ 500,000$ 1,020,000$
Segment margin (95,000)$ 150,000$ 55,000$
Allocated fixed costs (71,000) (84,000) (155,000)
Operating income (loss) (166,000)$ 66,000$ (100,000)$
Plan B Plan C
Sales 3,100,000$ 2,000,000$
Royalties – 137,500
Total revenue 3,100,000$ 2,137,500$
Variable costs:
Direct material 775,000$ 500,000$
Direct labor 775,000 500,000
Factory overhead 542,500 350,000
Total 2,092,500$ 1,350,000$
Contribution margin 1,007,500$ 787,500$
Direct fixed costs:
Solution
Plan A
Overhead 475,000$ 475,000$
Promotion costs 100,000 100,000
Allocated costs 155,000 155,000
Total 730,000$ 730,000$
Operating income (loss) 277,500$ 57,500$
Insert your answers in the gray–shaded cells. Enter amounts to be subtracted as negatives.