# Question: Ivy Kay Inc makes one type of doggie sweater that

Ivy Kay, Inc. makes one type of doggie sweater that it sells for $25 each. Its variable cost is $12.50 per sweater and its fixed costs total $8,600 per year. Ivy Kay currently has the capacity to produce up to 1,000 sweaters per year, so its relevant range is 0 to 1,000 sweaters.

Required:

1. Prepare a contribution margin income statement for Ivy Kay assuming it sells 600 sweaters this year.

2. Without any calculations, determine Ivy Kay’s total contribution margin if the company breaks even.

3. Calculate Ivy Kay’s contribution margin per unit and its contribution margin ratio.

4. Calculate Ivy Kay’s break-even point in number of units and in sales revenue.

5. Suppose Ivy Kay wants to earn $3,000 this year. Determine how many sweaters it must sell to generate this amount of profit. Is this possible?

6. Prepare a CVP graph for Ivy Kay including lines for both total cost and sales revenue. Clearly identify fixed cost and the break-even point on your graph.

Required:

1. Prepare a contribution margin income statement for Ivy Kay assuming it sells 600 sweaters this year.

2. Without any calculations, determine Ivy Kay’s total contribution margin if the company breaks even.

3. Calculate Ivy Kay’s contribution margin per unit and its contribution margin ratio.

4. Calculate Ivy Kay’s break-even point in number of units and in sales revenue.

5. Suppose Ivy Kay wants to earn $3,000 this year. Determine how many sweaters it must sell to generate this amount of profit. Is this possible?

6. Prepare a CVP graph for Ivy Kay including lines for both total cost and sales revenue. Clearly identify fixed cost and the break-even point on your graph.

## Answer to relevant Questions

King Peak Company produces one security door model. A partially complete table of its costs follows:Required:1. Complete the table.2. King Peak sells its doors for $200 each. Prepare a contribution margin income statement ...Briefly describe the five steps of the management decision-making process.Explain how a constrained resource impacts management decisions in both the long term and the short term.A number of terms and concepts from this chapter and a list of descriptions, definitions, and explanations follow. For each term listed on the left, choose at least one corresponding item from the right. Note that a single ...Listed below are a number of statements concerning management’s decision-making process. Identify whether each statement is correct or incorrect. For all incorrect statements, indicate how to correct the statement.1. The ...Post your question