Gifford Company currently manufactures and sells two styles of upholstered chairs, upright (stationary) chairs and recliner...

 

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Gifford Company currently manufactures and sells two styles of upholstered chairs, upright (stationary) chairs and recliner rockers. The VP of Marketing projects the following volume and selling price, and the production manager estimates variable cost per unit of each product for next year: Upright 3,200 $375 $190 Recliner 800 $560 $270 Units Selling price per unit Variable cost per unit Total fixed costs are projected to be $635,000. The tax rate is 35%. Desired after-tax net income is $150,000. REQUIRED: а. Prepare an analysis showing the following, assuming the sales mix remains constant: (1) Prepare a condensed income statement in the contribution margin format for the projected sales volume. The statement should show contribution margin for each product and total after-tax net income (similar to the condensed income statement on p. 85 of the text). (2) Assuming a constant sales mix, calculate the break-even point in total units and total sales dollars, then apply the sales mix to show the break down by product. Calculate the following for total sales (not by product): a. margin of safety in dollars, b. margin of safety ratio, and c. degree of operating leverage (3) The vice president of marketing wants to know how many units would need to be sold to earn the desired after-tax net income. Assuming a constant sales mix, compute the units (in total and then broken down by product), and prepare a condensed income statement showing the results." (4) a. b. b. (1) The president, Jim Gifford, believes the VP of marketing is has underestimated sales of rediner- rockers, which he thinks will have a stronger demand this year. He asks you to repeat your analyses in part (a) using the following projected sales: Upright 3,000 Recliner 1,000 Units Selling prices, variable costs per unit, and total fixed costs remained the same. (You should be able to use the spreadsheet you developed for part (a) and only need to change the numbers in your data section.) (2) Comment on the results. That is, what effect does the shift in sales mix have on net income, the breakeven point, and margin of safety? Gifford Company currently manufactures and sells two styles of upholstered chairs, upright (stationary) chairs and recliner rockers. The VP of Marketing projects the following volume and selling price, and the production manager estimates variable cost per unit of each product for next year: Upright 3,200 $375 $190 Recliner 800 $560 $270 Units Selling price per unit Variable cost per unit Total fixed costs are projected to be $635,000. The tax rate is 35%. Desired after-tax net income is $150,000. REQUIRED: а. Prepare an analysis showing the following, assuming the sales mix remains constant: (1) Prepare a condensed income statement in the contribution margin format for the projected sales volume. The statement should show contribution margin for each product and total after-tax net income (similar to the condensed income statement on p. 85 of the text). (2) Assuming a constant sales mix, calculate the break-even point in total units and total sales dollars, then apply the sales mix to show the break down by product. Calculate the following for total sales (not by product): a. margin of safety in dollars, b. margin of safety ratio, and c. degree of operating leverage (3) The vice president of marketing wants to know how many units would need to be sold to earn the desired after-tax net income. Assuming a constant sales mix, compute the units (in total and then broken down by product), and prepare a condensed income statement showing the results." (4) a. b. b. (1) The president, Jim Gifford, believes the VP of marketing is has underestimated sales of rediner- rockers, which he thinks will have a stronger demand this year. He asks you to repeat your analyses in part (a) using the following projected sales: Upright 3,000 Recliner 1,000 Units Selling prices, variable costs per unit, and total fixed costs remained the same. (You should be able to use the spreadsheet you developed for part (a) and only need to change the numbers in your data section.) (2) Comment on the results. That is, what effect does the shift in sales mix have on net income, the breakeven point, and margin of safety?

Answer rating: 100% (QA)

a 1 Standard Deluxe Total Amount Amount Amount Sales Revenue 1200000 10000 448000 10000 1648000 10000 Variable Expenses 608000 5067 216000 4821 824000 ... View the full answer