Magnificent Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following
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Question:
Magnificent Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during year 1. All purchases and sales were made with cash.
- Acquired $950,000 of cash from the owners.
- Purchased $670,000 of manufacturing equipment. The equipment has a $54,000 salvage value and a four-year useful life.
- The company started and completed 7,000 modems. Direct materials purchased and used amounted to $40 per unit.
- Direct labor costs amounted to $25 per unit.
- The cost of manufacturing supplies used amounted to $4 per unit.
- The company paid $50,000 to rent the manufacturing facility.
- Magnificent sold all 5,000 units at a cash price of $150 per unit.
- The sales staff was paid a $6 per unit sales commission.
- Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a three-year useful life.
- Administrative expenses consisting of office rental and salaries amounted to $71,950.
Required
Use the following partially completed form to create an income statement using the contribution margin format.
Determine the break-even point in units and in dollars.
Assume that next year's sales are budgeted to be the same as the current year's sales. Determine the margin of safety expressed as a percentage.
Related Book For
Fundamental Managerial Accounting Concepts
ISBN: 978-0078110894
6th Edition
Authors: Edmonds, Tsay, olds
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