solutions to problems in chapter 8

# solutions to problems in chapter 8 - DATA INPUT Current...

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DATA INPUT Current Year's Net Income \$200,000 Current Year's Sales Volume 200,000 Sales price per DVD \$16 Variable cost per unit purchase price \$10 Handling cost per unit \$2 Annual fixed costs \$600,000 Expected increase in unit purchase price 30% SOLUTION 1. Break-even point in units, using the equation approach: \$16 X - \$10 + \$2 X - \$600,000 = 0 \$4 X = \$600,000 X = \$600,000 / \$4 X = 150,000 units 2. Net income if there is a 10% increase in projected unit sales volume: New projected sales volume = 200,000 x 110% = 220,000 units Net income = 220,000 x \$16 - \$12 - \$600,000 = 220,000 x \$4 - \$600,000 = \$880,000 - \$600,000 = \$280,000 3. Volume of sales to maintain same net income if selling price remains at \$16: Target net income = \$200,000 (from original problem data) New disk purchase price = \$10 x 130% = \$13 Volume of sales dollars required: Volume of sales dollars required = fixed expenses + target net profit/ contribution-margin ratio Volume of sales dollars required = 600,000 + 200,000 / (( 16 - 13 - 2 ) / \$16 ) = 800,000 / 0.0625 = \$12,800,000

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DATA INPUT Units sold 100,000 Sales \$1,000,000 Costs: Fixed Variable Direct material \$- \$300,000 Direct labor - 200,000 Manufacturing overhead 100,000 150,000 Selling and administrative 110,000 50,000 Total costs \$210,000 \$700,000 910,000 Budgeted operating income \$90,000 Tax rate 40% SOLUTION 1. Break-even point in units and in sales dollars: (a) Unit contribution margin = sales - variable costs / units sold = \$1,000,000 - \$700,000 / 100,000 = \$3 per unit Break-even point (in units) = fixed costs / unit contribution margin = \$210,000 / \$3 = 70,000 units (b) Contribution- margin ratio = contribution margin / sales revenue = \$1,000,000 - \$700,000
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## This note was uploaded on 02/29/2012 for the course E 101 taught by Professor Sfere during the Spring '12 term at Abilene Christian University.

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solutions to problems in chapter 8 - DATA INPUT Current...

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