| number of units produced per month | | | | | 20,000 |
| Unit variable cost | | | | | $7+$11+$6+$2=$26 |
| total cost of production per unit | | | | | $34 |
| fixed cost | | | | | total cost of production - unit variable cost * number of units = $10 |
| total fixed cost | | | | | fixed overhead + fixed marketing cost = $14 |
| Contribution Margin per Unit = Sales Price – Variable Cost per Unit |
| contribution margin per Unit = $50 - $ 26 = $ 24 |
| B) |
| | | | contribution margin income statement |
| items | | | price | | | total |
| sales | | | $50*20,000 | | | $1,000,000 |
| less: variable cost | | | $ 26*20,000 | | | $520,000 |
| contribution margin | | | | | | $480,000 |
| less: fixed cost | | | $ 14*20,000 | | | $280,000 |
| operating income | | | | | | $200,000 |
| C) |
| Brrak-even point in units = total fixed cost /contribution margin per unit |
| break-even point in units = $280,000/$ 24 |
| beak-even point per unit = 11666.67 |
| D) |
| Break-even point in sales dollars = total fixed cost / contribution margin ratio |
| contribution margin ratio= (sales-variable cost) / sales |
| contribution margin ratio = $ 480000/$1000000 |
| contribuition margin ratio = 48% |
| break-even point in sales dollars = $280,000/ 0.48 |
| break-even point in sales dollars = $ 583,333.333 |
| Part 2 |
| Part 3 |
| Variable market cost | | | $2+$15=$17 |
| Total unit Variable cost | | | $7+$11+$6+$17=$41 |
| Fixed O verheads per month=$10*22000=$220000+$50000=$270000 |
| | | | contribution margin income statement |
| items | | | price | | | total |
| sales | | | $70*22000 | | | $1,540,000 |
| less: variable cost | | | $41*22000 | | | $902,000 |
| contribution margin | | | | | | $638,000 |
| less: fixed cost | | | $4*22000+ $270000 | | | $358,000 |
| operating income | Profit | | | | | $280,000 |
| Break Even point= Total Fixed cost/Contribution margin per unit |
| Contribution Margin ratio= | | per unit= | Sales price -Variable cost per Unit |
| Contribution Margin ratio= | | per unit= | $70-$41=$29 |
| Break Even Point in Units=$358,000/$29=12,344.83 |
| Break Even Points in units=12,344.83 |
| Break-even point in sales dollars = total fixed cost / contribution margin ratio |
| contribution margin ratio= (sales-variable cost) / sales |
| Contribution Margin ratio=$638000/$1540000 |
| Contribution Margin ratio=41.42% |
| Break Even Point in Sales dollars=$330000/0.4142 | Point in sales dollars= | | $358000/0.4142 |
| Break Even Point in sales dollars=$79,671.65 | | | s=$864137.93 |
| D) |
| | | | contribution margin income statement |
| items | | | price | | | total |
| sales | | | $70*20,000 | | | $1,400,000 |
| less: variable cost | | | $41*20,000 | | | $820,000 |
| contribution margin | | | | | | $580,000 |
| less: fixed cost | | | $4*20,000 + 250,000 | | | $330,000 |
| operating income | | | | | | $250,000 |
| the company is better off producing backpacks with aluminium frame since the operatinmg income for backpacks with aluminium frames is higher ($280,000) than without the aluminum frames ($250,000) |
| Part 4 |
| A) |
| | | | contribution Margin income statement |
| items | | | price | | | total |
| sales | | | $50*20,000 | | | $1,000,000 |
| less: variable cost | | | $19*20,000 + $98,000 | | | $478,000 |
| contribution margin | | | | | | $522,000 |
| less: fixed cost | | | $14*20,000 + $25,000 | | | $305,000 |
| operating income | | | | | | $217,000 |
| B) |
| break-even point I units = total fixed point/ contribution margin per unit |
| contribution margin per unit = sales price -variable costs per unit |
| contribution margin per unit = $50 -$26 = $24 |
| break-even point in units =$305,000/ $24 |
| break-even point in units = 12, 708.33 |
| break-even point in sales dollars = total fixed cost/contribution margin ratio |
| contribution margin ratio= (sales-variable cost) / sales |
| contribution margin ratio= ($1000000 - $478,000)/ $1000000 |
| contribution margin ratio= 52.2% |
| break-even point in sales dollars = $305,000/ 0.522 |
| break-even point in sales dollars = $584,291.1877 |
| C) |
| Hello, I am writing to you concerning the changes that your company is likely to face by changing the type of raw materials used in the production of goods. I have noted that whenever the company changes the type of raw materials used, there is a lot of expenses that are incurred in the process. The company suffers additional costs when they decide to change the raw materials. from the contribution income statement, the number of sales were reorded to be high whereas fixed costs saw an increase by $25,000. one advantsge of using a different raw material is that it can lead to more sales. i realise that there was a reduction in sales whenever, the variable material cost were reduced. the operational income of the company was found to be $217,000 per month which is lower. moreover the change of of suppliers can lead to operational complications. |
Nandik1472
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