Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product
Question:
Praveen Co. manufactures and markets a number of rope products. Management is considering the future of Product XT, a special rope for hang gliding, that has not been as profitable as planned. Since Product XT is manufactured and marketed independently of the other products, its total costs can be precisely measured. Next year’s plans call for a $300 selling price per 100 yards of XT rope. Its fixed costs for the year are expected to be $210,000, up to a maximum capacity of 550,000 yards of rope. Forecasted variable costs are $240 per 100 yards of XT rope.
3. Prepare a contribution margin income statement showing sales, variable costs, and fixed costs for Product XT at the break-even point.
PRAVEEN CO. | ||||
Contribution Margin Income Statement (at Break-Even) — Product XT | ||||
Units | $ per unit | Total | ||
Salesselected answer correct | 5,500selected answer incorrect | $300selected answer correct | $1,650,000 | |
not attempted | Variable costselected answer correct | 5,500 | 240selected answer correct | 1,320,000 |
Contribution margin | 5,500 | $60selected answer correct | 330,000 | |
not attempted | Fixed costsselected answer correct | 210,000selected answer correct | ||
Net incomeselected answer correct | $120,000 |
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta