# Question: Lipsius Marbles manufactures birdbaths statues and other decorative items which

Lipsius Marbles manufactures birdbaths, statues, and other decorative items, which it sells to florists and retail home and garden centers. Its design department has proposed a new product, a frog statue, that it believes will be popular with home gardeners. Expected variable unit costs are direct materials, $9.25; direct labor, $4.00; production supplies, $0.55; selling costs, $2.40; and other, $3.05. The following are fixed costs: depreciation, $33,000; advertising, $40,000; and other, $6,000. Management plans to sell the product for $29.25.

Required

1. Using the contribution margin approach, compute the number of statues the company must sell to

(a) Break even

(b) Earn a profit of $50,000.

2. Using the same data, compute the number of statues that must be sold to earn a profit of $70,000 if advertising costs rise by $20,000.

3. Using the original data and sales of 15,000 units, compute the selling price the company must charge to make a profit of $101,000.

4. According to the vice president of marketing, if the price of the statues is reduced and advertising is increased, the most optimistic annual sales estimate is 25,000 units. How much more can be spent on fixed advertising costs if the selling price is reduced to $28.00 per statue, the variable costs cannot be reduced, and the targeted profit for sales of 25,000 statues is $120,000?

Required

1. Using the contribution margin approach, compute the number of statues the company must sell to

(a) Break even

(b) Earn a profit of $50,000.

2. Using the same data, compute the number of statues that must be sold to earn a profit of $70,000 if advertising costs rise by $20,000.

3. Using the original data and sales of 15,000 units, compute the selling price the company must charge to make a profit of $101,000.

4. According to the vice president of marketing, if the price of the statues is reduced and advertising is increased, the most optimistic annual sales estimate is 25,000 units. How much more can be spent on fixed advertising costs if the selling price is reduced to $28.00 per statue, the variable costs cannot be reduced, and the targeted profit for sales of 25,000 statues is $120,000?

**View Solution:**## Answer to relevant Questions

Bar Company has a maximum capacity of 500,000 units per year. Variable manufacturing costs are $25 per unit. Fixed overhead is $900,000 per year. Variable selling and administrative costs are $5 per unit, and fixed selling ...What is a master budget and what are the guidelines that enhance its understandability and comparability? Hartford Company expects to sell 50,000 units of its product in the coming year. Each unit sells for $50. Sales brochures and supplies for the year are expected to cost $9,000. Two sales representatives cover the southeast ...Assigning the numbers 1 through 7, identify the order in which the following budgets are prepared. Direct labor budgetProduction budgetSelling, administrative, and general expenses budgetBudgeted income statementSales ...Queensland Enterprises needs a cash budget for the month of June. The following information is available:The cash balance on June 1 is $13,000.Sales for May and June are $40,000 and $50,000, respectively. Cash collections on ...Post your question