The Ice Cream Company produces super-premium ice cream for a local market in which it is...
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The Ice Cream Company produces super-premium ice cream for a local market in which it is sold through high-end gourmet and specialty food outlets. The company works with the retailers to carefully estimate demand for various flavors. The company holds no inventory and the retailers' volumes of sales determine the number of deliveries per week. The mix of ice cream flavors seems to be based on consumer preferences that remain relatively constant and does not vary much over time. The small factory has floor space to produce 30,000 pints of ice cream a month, but the factory has two lines of equipment that can make and package only 18,000 (9,000 each line). She has three freezer-equipped vans, each of which can deliver 6,000 pints of ice cream to the retailers each month. The company generally operates between 12,000 and 16,000 and averages 15,000 pints of ice cream a month. The fixed factory costs include supervisory salaries, insurance and rent on the building and equipment, including manufacturing and delivery equipment. Administrative and selling costs are primarily fixed salaries. Direct costs include hourly direct labor and direct materials (consisting of ice-cream ingredients and packaging materials). Variable overhead costs include electrical power mostly for the ice cream makers and packaging equipment. It also includes fuel for the delivery trucks and indirect hourly labor. Revenue/Cost Structure Average price per pint Average Sales (pints) Variable manufacturing costs: Ingredients and packaging per pint Direct labor per pint Variable overhead per pint Fixed costs: Supervision and insurance Factory rent Two automated ice cream makers Two automated packaging machines Three delivery vehicles Administrative and selling costs $3.0 15,000 1.0 0.5 0.5 2,000 2,000 2,000 1,000 1,800 3,500 Question 2 Based on the information in the table above: • Write a contribution margin income statement (i.e., listing revenue, variable cost, contribution margin, fixed cost, and operating profit at the current average sales volume) • Calculate the break-even volume of ice cream (in pints). • How many pints must the company sell to reach a profit of $3,000 a month? • How many pints must the company sell to reach an after-tax profit of $3,000 a month if her income tax rate is 20%? The Ice Cream Company produces super-premium ice cream for a local market in which it is sold through high-end gourmet and specialty food outlets. The company works with the retailers to carefully estimate demand for various flavors. The company holds no inventory and the retailers' volumes of sales determine the number of deliveries per week. The mix of ice cream flavors seems to be based on consumer preferences that remain relatively constant and does not vary much over time. The small factory has floor space to produce 30,000 pints of ice cream a month, but the factory has two lines of equipment that can make and package only 18,000 (9,000 each line). She has three freezer-equipped vans, each of which can deliver 6,000 pints of ice cream to the retailers each month. The company generally operates between 12,000 and 16,000 and averages 15,000 pints of ice cream a month. The fixed factory costs include supervisory salaries, insurance and rent on the building and equipment, including manufacturing and delivery equipment. Administrative and selling costs are primarily fixed salaries. Direct costs include hourly direct labor and direct materials (consisting of ice-cream ingredients and packaging materials). Variable overhead costs include electrical power mostly for the ice cream makers and packaging equipment. It also includes fuel for the delivery trucks and indirect hourly labor. Revenue/Cost Structure Average price per pint Average Sales (pints) Variable manufacturing costs: Ingredients and packaging per pint Direct labor per pint Variable overhead per pint Fixed costs: Supervision and insurance Factory rent Two automated ice cream makers Two automated packaging machines Three delivery vehicles Administrative and selling costs $3.0 15,000 1.0 0.5 0.5 2,000 2,000 2,000 1,000 1,800 3,500 Question 2 Based on the information in the table above: • Write a contribution margin income statement (i.e., listing revenue, variable cost, contribution margin, fixed cost, and operating profit at the current average sales volume) • Calculate the break-even volume of ice cream (in pints). • How many pints must the company sell to reach a profit of $3,000 a month? • How many pints must the company sell to reach an after-tax profit of $3,000 a month if her income tax rate is 20%?
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Answer 1 Contribution Margin Income Statement for 15000 pints Particulars Amount Amount Revenue 1500... View the full answer
Related Book For
Managerial Accounting Tools for business decision making
ISBN: 978-1118096895
6th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
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