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Accounting

Business Solutions sells upscale modular desk units and office chairs in the ratio of 3:2 (desk unit:chair). The selling prices are $1,250 per desk unit and $500 per chair. The variable costs are $750 per desk unit and $250 per chair. Fixed costs are $120,000.

  

Required:
1.

Compute the selling price per composite unit. (Omit the “$” sign in your response.)

    

  Selling price per composite unit
Required:
1.

Compute the break-even point in dollar sales for year 2011. (Round your intermediate calculations to 2 decimal places. Omit the “$” sign in your response.)

  
  Break-even point in dollar sales for year 2011
2.

Compute the predicted break-even point in dollar sales for year 2012 assuming the machine is installed and there is no change in the unit sales price. (Round your intermediate calculations to 2 decimal places and final answer to nearest dollar amount. Omit the “$” sign in your response.)


  Break-even point in dollar sales for year 2012
3.

Prepare a forecasted contribution margin income statement for 2012 that shows the expected results with the machine installed. Assume that the unit sales price and the number of units sold (20,300 units) will not change, and no income taxes will be due. (Input all amounts as positive values. Omit the “$” sign in your response.)

  
JETSON COMPANY
Forecasted Contribution Margin Income Statement
For Year Ended December 31, 2012
  
4.

Compute the sales level required in both dollars and units to earn $161,000 of after-tax income in 2012 with the machine installed and no change in the unit sales price. Assume that the income tax rate is 30%. (Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number. Omit the “$” sign in your response.)

  
      
  Sales level required in dollars
5.

Prepare a forecasted contribution margin income statement that shows the results at the sales level computed in part 4. Assume an income tax rate of 30%. (Input all amounts as positive values. Round your “Sales level required in units” to nearest whole number. Round your intermediate calculations to 2 decimal places and final answers to the nearest whole number. Omit the “$” sign in your response.)

  

 

 

This year Cairo Company sold 41,000 units of its only product for $17.20 per unit. Manufacturing and selling the product required $126,000 of fixed manufacturing costs and $186,000 of fixed selling and administrative costs. Its per unit variable costs follow.

   
           
  Material   $ 4.60  
  Direct labor (paid on the basis of completed units)     3.60  
  Variable overhead costs     0.46  
  Variable selling and administrative costs     0.26  


Next year the company will use new material, which will reduce material costs by 60% and direct labor costs by 40% and will not affect product quality or marketability. Management is considering an increase in the unit sales price to reduce the number of units sold because the factory’s output is nearing its annual output capacity of 46,000 units. Two plans are being considered. Under plan 1, the company will keep the price at the current level and sell the same volume as last year. This plan will increase income because of the reduced costs from using the new material. Under plan 2, the company will increase price by 25%. This plan will decrease unit sales volume by 10%. Under both plans 1 and 2, the total fixed costs and the variable costs per unit for overhead and for selling and administrative costs will remain the same.

references

 7.
value:
3.12 points
 
 
Required:
1.

Compute the break-even point in dollar sales for both (a) plan 1 and (b) plan 2. (Round your contribution margin ratio to 2 decimal places after converting into percentage and other intermediate calculations to 2 decimal places. Round your final answers to the nearest dollar amount. Omit the “$” sign in your response.)

   
    
  Plan 1
2.

Prepare a forecasted contribution margin income statement with two columns showing the expected results of plan 1 and plan 2. The statements should report sales, total variable costs, contribution margin, total fixed costs, income before taxes, income taxes (40% rate), and net income. (Input all amounts as positive values. Round your contribution margin ratio to 2 decimal place, other intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount. Omit the “$” sign in your response.)

  
CAIRO CO.
Forecasted Contribution Margin Income Statement
  Plan 1 Plan 2
   $ [removed]  
  


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