The following information is available for each unit of finished product produced and sold (yes, this is
Question:
The following information is available for each unit of finished product produced and sold (yes, this is the same information that was used in Question 3):
| Sales price | $60 | Variable manufacturing cost | $20 | |
| Fixed manufacturing cost* | 12 | Variable marketing and administrative cost | 6 | |
| Fixed marketing and administrative cost * | 4 | |||
| *The unit fixed manufacturing cost and fixed marketing and administrative costs are based on an estimated volume of 6,000 units produced and sold. |
a) Prepare a traditional income statement in the space below.
The Power Tool Division of ABC Hardware sells one product, Jig Saw, and has the following data for the second quarter:
Units of output 1,200 units
Price per unit $ 150
Variable cost per unit $ 90
Total fixed costs $48,000
Calculate each of the following. Show your work in the space below your answer.
a) Quarterly operating profit when 1,200 units are sold. __________
b) Break-even volume in units. __________
c) Contribution margin ratio. __________
d) Break-even volume in sales dollars. __________
e) Sales dollars and units needed to generate an operating profit of $57,000. $__________ and __________ units
f) Number of units sold that would produce an operating profit of 15% of sales dollars. __________
The Power Tool Division of ABC Hardware sells one product, Jig Saw, and has the following data for the second quarter:
Units of output 1,200 units
Price per unit $ 150
Variable cost per unit $ 90
Total fixed costs $48,000
Assume that the Power Tool Division introduces a second product, Circular Saw, with a unit price of $200 and a unit variable cost of $120. The total fixed cost is increased to $68,000. The manager of ABC Hardware estimates that Jig Saws and Circular Saws will sell in a 60% and 40% ratio, respectively.
Calculate the break-even volume in units using the weighted-average contribution margin method. Show your work in the space below.
# of units of Jig Saw to break-even: __________
# of units of Circular Saw to break-even: __________
Expert Answer:
