ACCT1350 S18 Assignment #1 Assignment is to be submitted using the Excel Template located in the Assignment dropbox. This document is for reference only. Do not complete the assignment in Word. Q1. (12 Marks) The following is Jordon Manufacturing's contribution format income statement for last month: The company has no beginning or ending inventories and produced and sold 10,000 units during the month. Required: a) What is the company's contribution margin ratio? (2 marks) b) What is the company's break-even in units? (2 marks) c) If sales increase by 100 units, by how much should operating income increase? (4 marks) d) How many units would the company have to sell to attain target operating income of $225,000? (2 marks) e) What is the company's margin of safety in dollars? (2 marks) f) What is the company's degree of operating leverage? (2 marks) ACCT1350 S18 Assignment #1 Q2. (12 Marks) The following monthly data are available for the LaFille Company and its only product, Product SW: Required: a) Without resorting to calculations, what is the total contribution margin at the break-even point? (1 Mark) b) Management is contemplating the use of plastic gearing rather than metal gearing in Product SW. This change would reduce variable costs by $15. The company's marketing manager predicts that this would reduce the overall quality of the product and thus would result in a decline in sales to a level of 350 units per month. Should this change be made? (3 Marks) c) Assume that LaFille Company is currently selling 400 units of Product SW per month. Management wants to increase sales and feels that this can be done by cutting the selling price by $25 per unit and increasing the advertising budget by $20,000 per month. Management believes that these actions will increase unit sales by 50%. Should these changes be made? (4 Marks) d) Assume that LaFille Company is currently selling 400 units of Product SW. Management wants to automate a portion of the production process for Product SW. The new equipment would reduce direct labour costs by $20 per unit but would result in a monthly rental cost for the new robotic equipment of $10,000. Management believes that the new equipment will increase the reliability of Product SW, thus resulting in an increase in monthly sales of 12%. Should these changes be made? (4 Marks) a) ACCT1350 S18 Assignment #1 Q3. (8 Marks) Timeliner Company's most recent contribution format income statement is presented below: The company sells its only product for $15 per unit. There were no beginning or ending inventories. Required: a) Compute the company's break-even point in units sold. (2 Marks) b) Compute the total variable expenses at the break-even point. (2 Marks) c) How many units would have to be sold to earn a target operating income of $9,000? (2 Marks) d) The sales manager is convinced that a $6,000 increase in the advertising budget would increase total sales by $25,000. Would you advise the increased advertising outlay? (2 Marks) ACCT1350 S18 Assignment #1 Q4. (12 Marks) The following monthly budgeted data are available for the Data Management Company: Budgeted operating income for the month is $220,000. Required: a) Calculate the break-even sales for the month. (8 Marks) b) Calculate the margin of safety. (2 Marks) c) Calculate the degree of operating leverage. (2 Marks) ACCT1350 S18 Assignment #1 Q5. (6 Marks) Dersyn Corporation produces and sells two models of vacuum cleaners, Standard and Deluxe. The company records show the following monthly data relating to these two products: Calculate the break-even in sales dollars for the expected sales mix. Show all your calculations. (6 Marks)