ch 19 from wiley hw and multiple choice

# ch 19 from wiley hw and multiple choice - E19-6 Grass King...

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E19-6 Grass King manufactures lawnmowers, weed-trimmers, and chainsaws. Its sales mix and contribution margin per unit are as follows. Sales Mix Contribution Margin per Unit Lawnmowers 30% \$30 Weed-trimmers 50% \$20 Chainsaws 20% \$40 Grass King has fixed costs of \$4,600,000. Compute the number of units of each product that Grass King must sell in order to break even under this product mix. Lawnmowers 51,111 units Weed-trimmers 85,185 units Chainsaws 34,074 units Sales Mix Percentage Contribution Margin Per Unit Weighted-Average Contribution Margin Lawnmowers 30% \$30 \$9 Weed-trimmers 50% \$20 10 Chainsaws 20% \$40 8 \$27 Total break-even = FC/CM = \$4,600,000 ÷ \$27 = 170,370 units Sales Units Sales Mix Percentage Total Breakeven Sales Units Sales Units Needed Per Product Lawnmowers 30% × 170,370 = 51,111 units Weed-trimmers 50% × 170,370 = 85,185 units Chainsaws 20% × 170,370 = 34,074 units 170,370 units AE19-15 Imagen Arquitectonica of Tijuana, Mexico is contemplating a major change in its cost structure. Currently, all of its drafting work is performed by skilled draftsmen. Alfredo Ayala, Imagen's owner, is considering replacing the draftsmen with a computerized drafting system. However, before making the change Alfredo would like to know the consequences of the change, since the volume of business varies significantly from year to year. Shown below are CVP income statements for each alternative. Manual System Computerized System Sales \$1,783,000 \$1,783,000 Variable costs 1,426,400 713,200 Contribution margin 356,600 1,069,800 Fixed costs 110,669 823,869 Net income \$245,931 \$245,931 Determine the degree of operating leverage for each alternative. Manual System 1.45 Computerized System 4.35 Which alternative would produce the higher net income if sales increased by \$146,000? Computerized system

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Using the margin of safety ratio, determine which alternative could sustain the greater decline in sales before operating at a loss. Manual system E19-17 Bob's Company builds custom fishing lures for sporting goods stores. In its first year of operations, 2010, the company incurred the following costs. Variable Cost per Unit
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## This note was uploaded on 11/06/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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ch 19 from wiley hw and multiple choice - E19-6 Grass King...

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