# AC202 Week 6 Homework Answers - Problem 22-5A(65 minutes...

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Part 1 Instructor note: Use the equation in Exhibit 22.12 Break-even in dollar sales = Fixed costs / Contribution margin ratio Product T: = \$127,500 / 20%* = \$637,500 Product O: = \$1,504,500 / 87.5%* = \$1,719,429 (rounded to the nearest dollar) *To compute contribution margin ratio Sales price per unit Product T (\$2,040,000 / 51,000). ........................................ Product O (\$2,040,000 / 51,000). ........................................ __T__ \$40 __O__ \$40 Variable costs per unit Product T (\$1,632,000 / 51,000). ........................................ Product O (\$255,000 / 51,000). ........................................... \$32 \$ 5 Contribution margin ratio Product T (\$40- \$32) / \$40). ................................................ Product O (\$40- \$5) / \$40). ................................................. 20.0% 87.5% Part 2 Forecasted contribution margin income statements for each product assuming sales declines to 40,000 units with no change in unit sales price SHOL CO. Forecasted Contribution Margin Income Statement Product T Product O Sales*. .................................................................... \$1,600,000 \$1,600,000 Variable costs**. .................................................... 1,280,000 200,000 Contribution margin. ............................................. 320,000 1,400,000 Fixed costs. ........................................................... 127,500 1,504,500 Income before taxes. ............................................ 192,500 (104,500) Income taxes (34%). .............................................. 65,450

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## This note was uploaded on 11/11/2011 for the course AC 202 taught by Professor Nancyeverett during the Spring '09 term at Park.

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AC202 Week 6 Homework Answers - Problem 22-5A(65 minutes...

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