Homework - Week 3

# Fixed expenses net operating income 0 0 try again try

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Fixed expenses Net operating income \$0 \$0 Try again! Try again!

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PROBLEM 6-23 1) A. Total Percentage Sales 300,000 500,000 800,000 100% Variable Costs 180,000 100,000 280,000 35% Contribution Margin 120,000 400,000 520,000 65% Fixed Costs 475,800 Net Operating Income 44,200 B. Formula: Fixed Cost / Contribution Margin Ratio Break Even Point in \$ = 475,800 / 65% 732,000 Formula: Actual Sales - Break-Even Sales Margin of Safety in \$= 800,000 - 732,000 = \$68,000 Formula: Margin of safety in dollars / Actual Sales Margin in Safety in %= 68,000 / 800,000 = 8.5% 2) A. Total Percentage Sales 300,000 500,000 450,000 1,250,000 100% Variable Costs 180,000 100,000 360,000 640,000 51.2% Contribution Margin 120,000 400,000 90,000 610,000 48.8% Fixed Costs 475,800 Net Operating Income 134,200 B. Formula: Fixed Cost / Contribution Margin Ratio Break Even Point in \$ = 475,800 / 48.8% 975,000 Formula: Actual Sales - Break-Even Sales Margin of Safety in \$= 1,250,000-975,000=275,000 Formula: Margin of safety in dollars / Actual Sales Margin in Safety in %= 275,000 / 1,250,000 = 22% 3) Hawaiian Fantasy Tahitian Joy Hawaiian Fantasy Tahitian Joy Samoan Delight
PROBLEM 7-12 1) ABSORPTION COSTING a. Direct Materials \$20 Direct Labor 8 Variable overhead 2 Fixed Mfg overhead 10 (\$100,000 / 10,000) \$40 b. Income Statement Sales (8,000 x \$75) \$600,000 Cost of Goods Sold (8,000 x \$40) (320,000) Gross Profit 280,000 Variable selling expense (8,000 x \$6) 48,000 Fixed selling expense 200,000 (248,000) 32,000 2) VARIABLE COSTING a. Direct Materials \$20 Direct Labor 8 Variable overhead 2 Total unit product cost = \$30 b. Income Statement Sales (8,000 x \$75) \$600,000 Variable Costs: Variable cost of goods sold 240,000 (\$8,000 x \$30) Variable selling expense 48,000 (288,000) (8,000 x \$6) Contribution Margin 312,000 Fixed Costs: Fixed Manufacturing costs 100,000 Fixed seling & admin 200,000 (300,000) Net Operating Income 12,000
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