The Peace Company/Suzy Manufacturing
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Problem 1:
The Peace Company has the following functional (traditional) income statement for the prior month.
Sales | ($50 * 100,000 units) | $5,000,000 | |
Cost of goods sold | |||
Direct materials | $1,200,000 | ||
Direct labor | $950,000 | ||
Variable factory overhead | $600,000 | ||
Fixed factory overhead | $850,000 | $3,600,000 | |
Gross profit | $1,400,000 | ||
Selling and administrative expense | |||
Variable | $250,000 | ||
Fixed | $120,000 | $370,000 | |
Operating income | $1,030,000 | ||
There were no beginning and ending inventories. |
Required:
- Calculate the contribution margin per unit.
- Calculate the contribution margin ratio.
- What is the break-even point in units?
- What is the amount of sales in dollars needed to obtain a before-tax profit of $40,000?
Problem 2:
Suzy Manufacturing has estimated monthly sales of 18,000 units for $48 per unit. Variable costs include manufacturing costs of $27 and distribution costs of $9 per unit. Fixed costs are $60,000 per month.
Required:
Determine each of the following values.
- Unit contribution margin
- Monthly break-even unit sales volume
- Before-tax monthly profit
- Monthly margin of safety in units
12 years ago
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