Question 31.

The liners sell, on average, for $175 each. The department's variable selling expenses are $80,000. The remaining selling expenses are fixed. The administrative expenses are 30% variable and 70% fixed. The company purchases its liners from a supplier at a cost of $62.50 per liner.

The 4 x4 Shop

Income Statement - Linear Department for First Quarter of Current Year

Sales		$700,000
Less cost of goods sold		250,000
Gross margin		450,000
Less operating expenses:
Selling expenses	$200,000
Administrative expenses	140,000	340,000
Net income		$110,000

1. Prepare a Contribution Margin Income Statement in proper form Using the Income Statement Liner Department for First Quarter of Current Year. Show breakdown of all costs and calculations

2. What is the sales revenue ($) they need to achieve in order to break-even?

3. Calculate how many liners the company would need to sell IF it wanted to make TARGET profit of $120,000.

4. The Marketing Manager argues that a $4,000 increase in the Quarterly advertising budget would increase quarterly sales by $9,975. Should we increase the advertising budget? Show your work.

Question 32.

Ryan Corporation is a charitable organization that supplies boxes of food free to families in need. The fixed costs to run this organization are $1,000,000. Each box of food costs $80. The corporation has a budgeted appropriation of $2,400,000 for all costs.

1. Given their current budget above, how many families can receive a box of food?

2. The Board of Directors of Ryan Corporation have decided that they wish to expand the charity's work so as to serve 20,000 families per year. The cost of each box of food will remain the same but they will need to hire a manager and purchase a specialized vehicle which will cost a total of an additional $100,000 per year. How much must the organization raise in total to serve the 20,000 families?