Determine the break-even in sales dollars for the Skinny-Bar product and prepare a variable costing income...

 

  

 

 

 

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Determine the break-even in sales dollars for the Skinny-Bar product and prepare a variable costing income statement based on the information provided in Exhibit 1 for actual sales. The income statement must include the cost of direc materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead, and fixed general and administrative costs. Exhibit 1 Planning notes from the 20X5 launch of the Skinny-Bar 20X5 actual sales $288,600 230,880 Total manufacturing costs (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.) The contribution margin ratio for this product was 35%. 156,000 bars were sold at $1.85 per bar. This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed. The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively. Prepare a lifetime cost analysis of Skinny-Bar and propose a selling price for this new product based on BBCC's markup policy. The overhead costs, the batch size, the machine hours per batch, the number of inspections per batch, set up times and the number of product lines should be based on the activity-based analysis prepared in requirement 1 using the batch size for the The-Bar product. Direct labour hours per batch is 22.5. Product costs are based on one product line. Lifetime research and development costs are $900,000 for the Skinny-Bar. Use the activity rates calculated in requirement 1 as well. Compare the proposed price with the selling price set at the time of the initial introduction of this product. Discuss the adequacy of this new proposed price. Exhibit 2 Actual operating income statement For the year ended December 31, 20X7 The-Bar Per bar Alamonde Per Salt-Lick Per Total bar bar Volume Sales Cost of goods sold Gross margin Selling and administrative 776,000 $1,164,000 $1.50 945,595 528,000 $897,600 724,672 302,500 $ 605,000 $2.00 448,187 1,606,500 $2,666,600 2.118,454 $1.70 $ 218,405 $ 172,928 $ 156,813 $ 548,146 541,681 expenses Operating income Gross margin % 6.465 18.8% 19.3% 25.9% 20.6% Budgeted operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Per bar Per bar Salt-Lick Per Total bar Volumes Sales Cost of goods sold 774,400 $1,161,600 $1.50 996.034 529, 100 $ 952,380 $1.80 690.756 301,400 $ 602,800 $2.00 390.297 1,604,900 $2,716,780 2.077.087 Gross margin Selling and administrative $ 165,566 $ 261,624 $ 639,693 542.554 $212,503 expenses $ 97.139 Operating income Gross margin % 14.3% 27.5% 35.2% 23.5% Determine the break-even in sales dollars for the Skinny-Bar product and prepare a variable costing income statement based on the information provided in Exhibit 1 for actual sales. The income statement must include the cost of direc materials, direct labour, variable manufacturing overhead, fixed manufacturing overhead, and fixed general and administrative costs. Exhibit 1 Planning notes from the 20X5 launch of the Skinny-Bar 20X5 actual sales $288,600 230,880 Total manufacturing costs (Total manufacturing cost consists of $115,440 in prime costs and $147,186 in conversion costs.) The contribution margin ratio for this product was 35%. 156,000 bars were sold at $1.85 per bar. This was a pilot project of the product, so there were no beginning or ending inventories associated with the product. All non-manufacturing costs relating to this product are fixed. The margin of safety percentage for the product at this sales level was -15%. The profit margins on the company's current products can be found below in Exhibit 2. The most profitable product is the Salt-Lick bar at 25.9%, followed by Alamonde at 19.3% and The-Bar at 18.8%. Budgeted margins were 14.3%, 27.5%, and 35.2% for The-Bar, Alamonde, and Salt-Lick, respectively. Prepare a lifetime cost analysis of Skinny-Bar and propose a selling price for this new product based on BBCC's markup policy. The overhead costs, the batch size, the machine hours per batch, the number of inspections per batch, set up times and the number of product lines should be based on the activity-based analysis prepared in requirement 1 using the batch size for the The-Bar product. Direct labour hours per batch is 22.5. Product costs are based on one product line. Lifetime research and development costs are $900,000 for the Skinny-Bar. Use the activity rates calculated in requirement 1 as well. Compare the proposed price with the selling price set at the time of the initial introduction of this product. Discuss the adequacy of this new proposed price. Exhibit 2 Actual operating income statement For the year ended December 31, 20X7 The-Bar Per bar Alamonde Per Salt-Lick Per Total bar bar Volume Sales Cost of goods sold Gross margin Selling and administrative 776,000 $1,164,000 $1.50 945,595 528,000 $897,600 724,672 302,500 $ 605,000 $2.00 448,187 1,606,500 $2,666,600 2.118,454 $1.70 $ 218,405 $ 172,928 $ 156,813 $ 548,146 541,681 expenses Operating income Gross margin % 6.465 18.8% 19.3% 25.9% 20.6% Budgeted operating income statement For the year ended December 31, 20X7 The-Bar Alamonde Per bar Per bar Salt-Lick Per Total bar Volumes Sales Cost of goods sold 774,400 $1,161,600 $1.50 996.034 529, 100 $ 952,380 $1.80 690.756 301,400 $ 602,800 $2.00 390.297 1,604,900 $2,716,780 2.077.087 Gross margin Selling and administrative $ 165,566 $ 261,624 $ 639,693 542.554 $212,503 expenses $ 97.139 Operating income Gross margin % 14.3% 27.5% 35.2% 23.5%

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