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22 - Class Exercises

# 22 - Class Exercises - were \$30 and the fixed costs were...

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ACC212 NVCC-Annandale Mitchell Chapter 22 Class Exercises 1) Taylor Toy Train Company produces two models. Model A has sales of 400 units with a contribution margin of \$30 each. Model B has sales of 300 units with a contribution margin of \$50 each. If sales of Model B increases by 100 units, how much will profit change? (HINT: Sales units * CM = profit) 2) Harrison Company has the following two costs for two months of operation. Based on the information provided, what type of costs are these? 3) During the month of December, Taylor’s Toy Train Comp any sold 2500 trains cars at an average price of \$30. During the month, fixed costs were \$15,000 and variable costs were 70% of sales. 3a) Determine the contribution margin in dollars, per unit, and as a ratio. 3b) Using the CM technique , compute the break-even point in dollars and in units. 3c) Compute the margin of safety in dollars and as a ratio. 4) Taylor Toy Train Company had \$100,000 of net income in 2008 when the selling price per unit was \$50, the variable costs per unit
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Unformatted text preview: were \$30, and the fixed costs were \$300,000. Management expects per unit data and total fixed costs to remain the same in 2009. The president of Taylor Toy Train Company is under pressure from stockholders to increase net income by \$40,000 in 2009. 4a) Compute the number of units sold in 2008. 4b) Compute the number of units that would have to be sold in 2009 to reach the stockholders’ desired profit level. 4c) Assume that Taylor sells the same number of units in 2009 as it did in 2008. What would the selling price have to be in order to reach the stockholders’ desired profit level? Month Amount Units Produced Cost Per Unit Type of Costs? Costs A November \$30,000 30,000 December 45,000 50,000 Costs B November \$60,000 30,000 December 100,000 50,000 CM \$ CM per unit CM Ratio BE \$ BE units Margin of Safety \$ Margin of Safety ratio...
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