Question

Finch Company incurs annual fixed costs of $150,500. Variable costs for Finch’s product are $24.80 per...

Finch Company incurs annual fixed costs of $150,500. Variable costs for Finch’s product are $24.80 per unit, and the sales price is $40.00 per unit. Finch desires to earn an annual profit of $49,000.



Use the per unit contribution margin approach to determine the sales volume in units and dollars required to earn the desired profit.(Do not round intermediate calculations. Round your final answers to the nearest whole number.)

Sales in dollars
Sales volume in units

Gibson Company makes a product that sells for $33 per unit. The company pays $23 per unit for the variable costs of the product and incurs annual fixed costs of $95,000. Gibson expects to sell 22,600 units of product.

Determine Gibson’s margin of safety expressed as a percentage. (Round your answer to 2 decimal places (i.e., .2345 should be entered as 23.45).)

Zachary Corporation, which has three divisions, is preparing its sales budget. Each division expects a different growth rate because economic conditions vary in different regions of the country. The growth expectations per quarter are 5 percent for Cummings Division, 3 percent for Springfield Division, and 7 percent for Douglas Division.

  1. Complete the sales budget by filling in the missing amounts.

  2. Determine the amount of sales revenue that the company will report on its quarterly pro forma income statements.


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Homework Answers

Answer #1

Finch Company

sales volume in units = (Fixed Cost + desired profit) / (Sales price pe unit - Variable price per unit)

= (150500 + 49000 ) / ( 40 - 24.80 )

= 199500 / 15.20

= 13125 units

sales volume in dollars = (Fixed Cost + desired profit) /((Sales price pe unit - Variable price per unit) / Sales price pe unit) = (150500 + 49000 ) / ( 40 - 24.80 ) / 40 = 199500 / 38% = $525000

Gibson Company

Breakeven point = Fixed Cost / ((Sales price pe unit - Variable price per unit) / Sales price pe unit) = 95000 / (33 - 23)/33 = 95000 / 0.303 = $313531

Margin of Safety =(Sales - Breakeven point)/Sales = (22600 x 33 - 313531 ) / (22600 x 33 ) = 432269 / 745800 = 57.96%

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