Question

- Coats R Us Inc., manufactures and sells men’s coats. Each coat sells for $150 and the variable costs per coat is $80. The company’s fixed costs are $1,400,000. The company has an income tax rate of 50%.

- Compute contribution margin, contribution margin percentage, breakeven point in sales units, the revenues needed to breakeven?
- Coats R Us has a target monthly net income of $350,000. What is its target monthly operating income? How many coats must be sold each month to reach the target monthly net income?
- Compute the margin of safety, the margin of safety percentage and operating leverage if Coats R Us is currently selling 25,000 coats.
- Coats R Us now produces a women’s model of the coats as well. The company’s fixed costs are now $1,650,000. Each women’s coat is sold for $250 and has a unit variable cost of $150. Coats R Us sells five men’s coats for every two women’s coats sold. Fixed costs now equal $80,000. What is the breakeven point in unit sales and dollars for each type of product at the current sales mix?

Answer #1

Profits R Us has monthly operating costs of $1,000,000. It sells
Flying Wedgies for $200 each, and each Flying Wedgie costs $150 to
produce.
1. Treating the operating costs as fixed, how many Flying
Wedgies do they need to sell each month in order to break even?
2. What will their breakeven revenues be for the
month?

SIMPLE manufactures and sells a single product. The company’s
sales and expenses for last quarter follow: Total Per Unit Sales
$600,000 $40 Less: Variable Expenses $420,000 $28 Contribution
Margin $180,000 $12 Less: Fixed Expenses $146,520 Net Operating
Income $33,480 Required: What is the monthly break-even point in
units sold and in sales dollars? Without resorting to computations,
calculate the total contribution margin at the break-even point.
How many units would have to be sold each quarter to earn a target...

QUESTION 2
SPI-K manufactures and sells a single product. The company’s
sales and expenses for last quarter follow:
Total
Per Unit
Sales
$600,000
$40
Less: Variable Expenses
$420,000
$28
Contribution Margin
$180,000
$12
Less: Fixed Expenses
$146,520
Net Operating Income
$33,480
Required:
What is the monthly break-even point in units sold and in sales
dollars?
Without resorting to computations, calculate the total
contribution margin at the break-even point.
How many units would have to be sold each quarter to earn...

Problem D2-25 (Part Level Submission)
J Crane, Ltd. is a local coat retailer. The store’s accountant
prepared the following income statement for the month ended January
31:
Sales revenue
$
750,000
Cost of goods sold
300,000
Gross margin
450,000
Operating expenses
Selling expense
$
23,560
Administrative expense
49,500
73,060
Net operating income
$
376,940
Crane sells its coats for $250 each. Selling expenses consist of
fixed costs plus a commission of $6.50 per coat. Administrative
expenses consist of fixed costs...

The Frosty Corporation manufactures
and sells snow rakes. The rakes sell for $20 each.
Information about the company’s costs
is as follows:
Variable manufacturing cost per unit-
$6
Variable selling and administrative
cost per unit- $2
Fixed manufacturing overhead per
month- $300,000
Fixed selling and administrative cost
per month- $600,000
1.Determine the company’s monthly breakeven point in units
2. Determine the sales volume (in dollars) required for a
monthly operating income of $1,200,000.
3. Compute the company’s margin of safety...

The accountant of a local retailer prepared the following income
statement for this month:
Sales revenue
$600,000
Cost of goods sold
$250,000
Gross margin
$350,000
Less operating expenses
Selling expense
$73,000
Administrative expense
$65,000
$138,000
Net operating income
$212,000
The retailer sells its coats for $150 each. Selling expenses
consist of a commission of $5 per coat plus fixed costs. Each coat
costs $62.50 from the distributor. Administrative expenses consist
of a variable component equal to 5% of sales plus...

- The margin of safety is:
a) The difference between estimated sales and breakeven
sales.
b) Not a useful measure for management in understanding the risk
associated with a product line.
c) The amount sales can drop before the target profit is
met.
d) How far sales must increase to earn a profit.
- Which of the following is the amount by which sales
could drop before profits reach the breakeven point?
a) Operating leverage
b) Total contribution margin
c)...

Thornton Boot Co. sells men’s, women’s, and children’s boots.
For each type of boot sold, it operates a separate department that
has its own manager. The manager of the men’s department has a
sales staff of nine employees, the manager of the women’s
department has six employees, and the manager of the children’s
department has three employees. All departments are housed in a
single store. In recent years, the children’s department has
operated at a net loss and is expected...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
316,000
$
20
Variable
expenses
221,200
14
Contribution
margin
94,800
$
6
Fixed
expenses
78,000
Net operating
income
$
16,800
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
Break Even Point in unit sales
Break
Even Point in dollar sales
2. Without resorting to computations, what is the total
contribution margin at...

Menlo Company distributes a single product. The company’s sales
and expenses for last month follow:
Total
Per Unit
Sales
$
302,000
$
20
Variable expenses
211,400
14
Contribution margin
90,600
$
6
Fixed expenses
73,200
Net operating income
$
17,400
Required:
1. What is the monthly break-even point in unit sales and in
dollar sales?
2. Without resorting to computations, what is the total
contribution margin at the break-even point?
3-a. How many units would have to be sold each...

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