There are two problems this week. Click on the tab at the bottom of the spreadsheet to move to problem 2.
Best Harmonica Company manufactures and sells harmonicas to distributors. The model they produce sells to the distributors for $8.00 each. Following are cost estimates:
Sales	$3,480,000
Direct materials	543,750
Direct labor	761,250
Manufacturing overheadvariable	152,250
Manufacturing overheadfixed	640,000
Selling expensesvariable	78,300
Selling expensesfixed	300,000
Administrative expensesvariable	47,850
Administrative expensesfixed	185,000
Instructions
a. Prepare a CVP income statement based on these cost estimates.
b. Commute contribution margin ratio
c. Compute the break-even point in (1) units and (2) dollars.
d. Compute the margin of safety ratio.
e. Determine the sales dollars required to earn net income of $1,000,000.
Best Harmonica Company
Cost Volume Profit Income Statement
Sales
Variable manufacturing cost
Variable selling cost
Variable administrative cost		-
Contribution Margin		#VALUE!
Fixed manufacturing cost
Fixed selling cost
Fixed administrative cost		-
Net income		#VALUE!
Contribution margin ratio:
contribution margin / sales		#VALUE!
Break even dollars:
fixed cost $ / contribution margin %		#VALUE!
Break even units:
break even $ / sell price		#VALUE!
Margin of safety ratio:
(sales - breakeven $ )/ sales		#VALUE!
Sales to earn $1,000,000:
(fixed cost + target income) / contribution margin %		#VALUE!