accounting help

week4_lab2.xlsx

Problem 1

The budgets of four companies yield the following information:
	Company
	Blue	Red	Green	Yellow
Sales revenue	$960,000	$(4)	$770,000	$(10)
Variable costs	(1)	132,000	462,000	162,000
Fixed costs	(2)	145,000	220,000	(11)
Operating income (loss)	$32,000	$(5)	$(7)	$93,000
Units sold	160,000	11,000	(8)	(12)
Contribution margin per unit	$2.70	$(6)	$77.00	$16.00
Contribution margin ratio	(3)	0.70	(9)	0.40
Requirements:
1. Fill in the blanks for each missing value. (Round the contribution margin per unit to the nearest cent.)
2. Which company has the lowest break-even point in sales dollars?
3. What causes the low break-even point?

	Kincaid Company sells flags with team logos. Kincaid has fixed costs of $583,200 per year plus variable costs of $4.80 per flag. Each flag sells for $12.00.
	Requirements:
	1. Use the income statement equation approach to compute the number of flags Kincaid must sell each year to break even.
	2. Use the contribution margin ratio CVP formula to compute the dollar sales Kincaid needs to earn $33,000 in operating income for 2012. (Round the contribution margin to two decimal places.)
	3. Prepare Kincaid's contribution margin income statement for the year ended December 31, 2012, for sales of 72,000 flags. Cost of goods sold is 70% of variable costs. Operating costs make up the rest of variable costs and all of fixed costs. (Round your final answers to the nearest whole number.)
	4. The company is considering an expansion that will increase fixed costs by 21% and variable costs by $0.60 per flag. Compute the new break-even point in units and in dollars. Should Kincaid undertake the expansion? Give your reasoning. Round your final answers to the nearest whole number.