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:
- Calculate the contribution margin per unit.
- Calculate the contribution margin ratio.
- What is the break-even point in units?
- 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.
- Unit contribution margin
- Monthly break-even unit sales volume
- Before-tax monthly profit
- Monthly margin of safety in units