Select Page

Problem 1:

The Peace Company has the following functional (traditional) income statement for the priormonth.

 Sales (\$50 * 100,000 units) \$5,000,000 Cost of goods sold Direct materials \$1,200,000 Direct labor \$950,000 Variable factory overhead \$600,000 Fixed factory overhead \$850,000 \$3,600,000 Gross profit \$1,400,000 Selling and administrative expense Variable \$250,000 Fixed \$120,000 \$370,000 Operating income \$1,030,000 There were no beginning and ending inventories.

Required:

1. Calculate the contribution margin per unit.
2. Calculate the contribution margin ratio.
3. What is the break-even point in units?
4. What is the amount of sales in dollars needed to obtain a before-tax profit of \$40,000?

Problem 2:

Suzy Manufacturing has estimated monthly sales of 18,000 units for \$48 per unit. Variable costs include manufacturing costs of \$27 and distribution costs of \$9 per unit. Fixed costs are \$60,000 per month.

Required:

Determine each of the following values.

1. Unit contribution margin
2. Monthly break-even unit sales volume
3. Before-tax monthly profit
4. Monthly margin of safety in units