N 75000 0 37 22 5000 units Sales in 37 x 5000 units 185000 b N 120000 0 37 22

N 75000 0 37 22 5000 units sales in 37 x 5000 units

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N = ($75,000 + $0) ÷($37 − $22) = 5,000 unitsSales in $ = $37 x 5,000 units = $185,000b.N = ($120,000 + $0) ÷($37 − $22) = 8,000 unitsSales in $ = $37 x 8,000 units = $296,000
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c.A fixed cost structure increases risk and the number of units requiredto break-even.Exercise 3-5Aa.Price = Target sales price per unit; N = number of unitsSales − Variable cost Fixed cost = Profit(Price x 10,000) ($2.50 x 10,000) $36,000 = $20,000Price x 10,000 = $25,000 + $36,000 + $20,000Price = ($81,000 ÷ 10,000) = $8.10 b.Mote could reengineer its product so that it can be produced at a lower targeted cost. This would enable Mote to offer a competitiveprice while maintaining its profitability.Exercise 3-6ASales revenue ($16 x 200,000)$3,200,000Gross margin800,000= Cost of goods sold2,400,000Total units200,000= Cost of product per unit$12Fixed cost per unit7= Variable cost per unit$ 5Variable cost = $5 x 200,000 = $1,000,000Total contribution margin = $3,200,000 $1,000,000 = $2,200,000
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Exercise 3-7Aa.Sales price per unit$175Variable cost per unit(75)Contribution margin per unit$100b.Break-even in units = Fixed cost ÷Contribution margin per unitBreak-even in units = $600,000 ÷$100Break-even in units = 6,000 c.Required sales in units = (Fixed cost + Profit) ÷Contribution margin/UnitRequired sales in units = ($600,000 + $200,000) ÷$100Required sales in units = 8,000 Exercise 3-8ARequired sales = (Fixed cost + Desired profit) ÷Contribution margin Required sales = ($375,000 + $75,000) ÷($28 – $13)Required sales = 30,000 units at old priceRequired sales = (Fixed cost + Desired profit) ÷Contribution margin Required sales = ($375,000 + $75,000) ÷($25.00 – $13.00)Required sales = 37,500 units at new priceAdditional units required: 37,500 – 30,000 = 7,500 unitsExercise 3-9ARequired sales = (Fixed cost + Desired profit) ÷Contribution margin per unitRequired sales = ($375,000 + $75,000 + $36,000) ÷($25.00 –$13.00)Required sales = 40,500 units at the new price
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Exercise 3-10Aa. = 5b. = 4c. = 6d. = 2e. = 3f. = 1Exercise 3-11Aa.Price = Sales price per unit; N = Number of units(Price x N) – (Variable cost per unit x N) – Fixed cost =ProfitPrice (6,400 units) – $18 (6,400 units) – $161,400 = $69,000Price (6,400 units) = $345,600Price = $54 per unitb.Contribution margin income statement using new equipment:Sales ($54 x 6,400 units)$345,600Variable costs ($16 x 6,400 units)(102,400)Contribution margin$243,200Fixed cost ($161,400 + $9,000)(170,400)Net Income$ 72,800Naylor Company should invest in the new equipment becauseprofitability would increase by $3,800 ($72,800 – $69,000).
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Exercise 3-12ABegin by determining the break-even point and budgeted sales indollars:Break-even = Fixed cost ÷Contribution margin per unitBreak-even = $176,000 ÷($38 – $16)Break-even = 8,000 unitsBreak-even sales = $38 x 8,000 units = $304,000Budgeted sales = $38 x 21,000 = $798,000Margin of safety computations:Budgeted sales – Break-even salesMargin of safety=––––––––––––––––––––––––––––––––––––––Budgeted sales$798,000 – $304,000Margin of safety=–––––––––––––––––––––––––––$798,000Margin of safety=61.90% Exercise 3-13Aa.N = Number of units to break-evenSales − Variable cost − Fixed cost = Profit (Sales price x N) − (Variable cost per unit x N) = Fixed cost +Profit (Contribution margin per unit x N) = Fixed cost + ProfitN = (Fixed cost + Profit) ÷ Contribution margin per unitN = ($196,000 + $0) ÷($36 − $22) = 14,000 unitsBreak-even point in dollars = $36 x 14,000 = $504,000
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b.
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