Question

Please answer a2

The Vice President for Sales and Marketing at Waterways
Corporation is planning for production needs to meet sales demand
in the coming year. He is also trying to determine how the
company’s profits might be increased in the coming year. This
problem asks you to use cost-volume-profit concepts to help
Waterways understand contribution margins of some of its products
and decide whether to mass-produce any of them.

Waterways markets a simple water control and timer that it
mass-produces. Last year, the company sold 738,000 units at an
average selling price of $4.20 per unit. The variable costs were
$1,859,760, and the fixed costs were $867,888.

(a1)

Correct answer iconYour answer is correct.

What is the product’s contribution margin ratio?
**(Round ratio to 0 decimal places, e.g.
25%.)**

Contribution margin ratio | 40% |

eTextbook and Media

**Attempts: 2 of 5 used**

(a2)

New attempt is in progress. Some of the new entries may impact the last attempt grading.Your answer is incorrect.

What is the company’s break-even point in units and in dollars for this product?

Break-even point in units | units | ||

Break-even point in dollars |
$ |

Answer #1

**a1 Computation of Contribution Margin
Ratio:**

Contribution per unit = Selling price per unit - Variable expense per unit

Variable Cost per unit = $1,859,760 / 738,000 units = $2.52 per unit

Therefore, Contribution per unit = $4.20 - $2.52 = $1.68 per unit

Contribution Margin Ratio = Contribution per unit / Selling price per unit * 100

**Contribution Margin Ratio = $1.68 / $4.20
*100 = 40%**

**a2 Computation of company’s break-even point in units
and in dollars for this product:**

Break Even Units = Fixed Cost/Average Contribution Margin per unit

**Break Even Units = $867,888/$1.68 = 516,600
units**

**Computation of Breakeven in dollars:**

Breakeven in dollars = Break Even Units * Selling price per unit

Breakeven in dollars = 516,600 * $4.20 = $2,169,720

The Vice President for Sales and Marketing at Waterways
Corporation is planning for production needs to meet sales demand
in the coming year. He is also trying to determine how the
company’s profits might be increased in the coming year. This
problem asks you to use cost-volume-profit concepts to help
Waterways understand contribution margins of some of its products
and decide whether to mass-produce any of them.
Waterways markets a simple water control and timer that it
mass-produces. Last year,...

Please answer a3
The Vice President for Sales and Marketing at Waterways
Corporation is planning for production needs to meet sales demand
in the coming year. He is also trying to determine how the
company’s profits might be increased in the coming year. This
problem asks you to use cost-volume-profit concepts to help
Waterways understand contribution margins of some of its products
and decide whether to mass-produce any of them.
Waterways markets a simple water control and timer that it...

The Vice President for Sales and Marketing at Waterways
Corporation is planning for production needs to meet sales demand
in the coming year. He is also trying to determine how the
company’s profits might be increased in the coming year. This
problem asks you to use cost-volume-profit concepts to help
Waterways understand contribution margins of some of its products
and decide whether to mass-produce any of them.
Waterways markets a simple water control and timer that it
mass-produces. Last year,...

The Vice President for Sales and Marketing at Waterways
Corporation is planning for production needs to meet sales demand
in the coming year. He is also trying to determine how the
company’s profits might be increased in the coming year. This
problem asks you to use cost-volume-profit concepts to help
Waterways understand contribution margins of some of its products
and decide whether to mass-produce any of them.
Waterways markets a simple water control and timer that it
mass-produces. Last year,...

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Correct answer iconYour answer is correct.
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Sales price
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Fixed costs
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(a)
Correct answer iconYour answer is correct.
What is the contribution margin ratio?
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Correct answer iconYour answer is correct.
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(a)
Correct answer iconYour answer is correct.
What is the contribution margin ratio?
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Correct answer iconYour answer is correct.
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Product
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Variable costs
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(a)
Correct answer iconYour answer is correct.
Compute the contribution margin per machine hour for each
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eTextbook and Media
Attempts: 1 of 5 used
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Correct answer iconYour answer is correct.
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