We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF or read online on Scribd
EXERCISE 5-6 Computo tho Broak-Evon Point [05-5]
Wl Guided Example 56
Mauro Products distributes a single product, a woven basket whose selling
price fe $15 and whose variablo oxponco is $12 por unit Tho company's
monthly fixed expense is $4,200
Required:
1. Solve for the company's break-even point in unit sales using the
equation method
2. Solve for the company’s break-even point in dollar sales using the
equation method and the CM ratio,
3. Solve for the company’s break-even point in unit sales using the
formula method.
4. Solve for the company’s broak-oven point in dollar sales using the
formula method and the CM rato.
EXERCISE 5-7 Compute the Level of Sales Required to Attain a Target Profit
[L049
Wl Guided Example 5-7
Lin Corporation has a single product whose selling price is $120 and whose
variable expense is $80 per unit. The company’s monthly fxed expense is,
$50,000,
Required:
1. Using the equation method, solve for the unit salas that are required to
ean a target profit of $10,000.
2. Using the formula method, solve for the unit sales that are required to
‘ain a targot profit of $15,000. EXERCISE 5-8 Compute the Margin of Safety [LO5-7]
HI Guided Example 5-8
Molander Corporation is a distributor of a sun umbrella used at resort
hotels. Data conceming the next month’s budget appear below:
Selling price
Variable expenses
Fixed expenses
Unit eales .
Required:
$20 par unit
$20 per unit
$7,500 per month
4,000 units per month
1. Compute the company’s margin of safety.
2. Compute the company's margin of safety as 2 percentage of its sales.
EXERCISE 5-9 Compute and Use the Degree of Operating Leverage [LO5—]
Hl Guided Example 5-9
Engberg Company installs lawn sod in home yards. The company's most
recent monthly contribution format income statement follows:
Sales . 7
Variable expenses
‘Conritution margin. .
Fined expenses
Net operating income .
Roquired:
‘Ameunt Percent of Sales
480000 100%
32000 4096
“48,000 96
36.000
‘$10.00
1. Compute the company's degree of operating leverage.
2. Using the degree of operating leverage, estimate the impact on net
operating income of a 5% increase in sales.
3. Verify your astimate from part (2) above by constructing a new
contribution format income statement for the company assuming a 5%
increase in sales. EXERCISE 5-13 Using a Contribution Format Income Statement [LO5-1, L054]
Viller Company's most racent contriaution format income statement is,
shown below:
Total Per Unit
Sales (20,000 units). . $300,000 $15.00
Variable experses . 180,000 __9.00
Contribition margin 120,000 $ 6.00
Fixed expenses . 70,000
Net operating income
Required:
Prepare a new contribution format income statement under each of the
following conditions (consider each case independentiy)
1. The number of units sold increases by 15%.
2. The selling price decreases by $1.50 per unit, and the number of units
Sold increases by 25%
3. The selling price increases by $1.50 perunit, xed expenses increase
by $20,000, and the number of units sold decreases by 5%.
4. The selling price increases by 12%, variable expenses increase by 60
cents per unit, and the number of units sold decreases by 10%. EXERCISE 5-14 Break Even and Target Profit Analysis [1.05-3, LO5~4, 105-5,
105-6)
Lindon Gompany is the exclusive distributor for an automotive product thet
sells for $40 per unit and has a CM ratio of 30%. The company's fixed
expenses are $180,000 per year. The company plans to sell 16,000 units
tis yeer.
Required:
4+. What are the variable expenses per unit?
2. Using the equation method:
‘a. What is the break-even point in unit sales and in dollar sales?
b. What amount of unit sales and dollar sales is required to earn an
annual profit of $60,000?
cc. Assume that by using a more efficient shipper, the company is able
to reduce its variable expenses by $4 per unit. What is the
company's new break-even pointin unit sales and in dollar sales?
3. Repeat (2) above using the formula method