Assume that you are part of the accounting team for Copeland Productions. The company currently expects...

  

Transcribed Image Text:

Assume that you are part of the accounting team for Copeland Productions. The company currently expects to sell 533 units for total revenue of $16,900 each month. Copeland Productions estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $4,800 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below. Copeland Productions Contribution Margin Income Statement Sales Less: Variable costs Contribution margin Less: Fixed costs Operating income Copeland Productions is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar). $ X Next, complete the formula below to determine the break-even units. Total Fixed Costs / Contribution Margin per Unit = Units X / X = X units APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs Now consider each of the following scenarios for Copeland Productions. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately. Scenario 1 Scenario 2 Scenario 3 Copeland has been experiencing quality problems with materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit. CM per unit: $ Copeland will dispose of a machine in the factory. The depreciation on that equipment is $500 per month. CM per unit: $ Break-even units: units X X After some extensive market research, Copeland has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately. CM per unit: $ Break-even units: X X units Break-even units: X X units Assume that you are part of the accounting team for Copeland Productions. The company currently expects to sell 533 units for total revenue of $16,900 each month. Copeland Productions estimates direct materials costs of $3,150, direct labor costs of $4,200, variable overhead costs of $2,100, and variable selling and administrative costs of $1,050. Fixed costs of $4,800 are also expected, which includes fixed overhead and selling and administrative costs. Using this information, complete the contribution margin income statement shown below. Copeland Productions Contribution Margin Income Statement Sales Less: Variable costs Contribution margin Less: Fixed costs Operating income Copeland Productions is examining cost behavior patterns. Your recommendation is to first determine the break-even point in units. First, calculate the contribution margin (CM) per unit (rounded to the nearest dollar). $ X Next, complete the formula below to determine the break-even units. Total Fixed Costs / Contribution Margin per Unit = Units X / X = X units APPLY THE CONCEPTS: Effect of Changes to Sales Price, Variable Costs and Fixed Costs Now consider each of the following scenarios for Copeland Productions. Calculate the contribution margin (CM) per unit, rounded to nearest dollar, and the new break-even point in units, rounded to the nearest whole unit, for each scenario separately. Scenario 1 Scenario 2 Scenario 3 Copeland has been experiencing quality problems with materials supplier. Changing suppliers will improve the quality of the product but will cause direct materials costs to increase by $1 per unit. CM per unit: $ Copeland will dispose of a machine in the factory. The depreciation on that equipment is $500 per month. CM per unit: $ Break-even units: units X X After some extensive market research, Copeland has determined that a sales price increase of $2 per unit will not affect the sales volume and will be effective immediately. CM per unit: $ Break-even units: X X units Break-even units: X X units

Answer rating: 100% (QA)

1 Calculations Sales 16900 533 units 16900 per unit Less Variable Costs Direct Materials 3150 Direct Labor 4200 Variable Overhead 2100 Variable Sellin... View the full answer