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Question;CHAPTER;18 HW 12 Problems;The following costs result from the production and sale of 4,550;drum sets manufactured by Vince Drum Company for the year ended December 31;2011. The drum sets sell for $305 each. The company has a 40% income tax;rate.;Variable;production costs;Plastic;for casing;$;127,400;Wages;of assembly workers;423,150;Drum;stands;168,350;Variable;selling costs;Sales;commissions;118,300;Fixed;manufacturing costs;Taxes;on factory;9,500;Factory;maintenance;19,000;Factory;machinery depreciation;79,000;Fixed;selling and administrative costs;Lease;of equipment for sales staff;19,000;Accounting;staff salaries;69,000;Administrative;management salaries;149,000;Required;1.;Prepare a contribution margin income statement for the company.(Input all amounts as;positive values. Omit the "$" sign in your response.);VINCE DRUM COMPANY;Contribution Margin Income Statement;For Year Ended December 31, 2011;(4,550 units);(Click to select);Cost of goods sold;Sales commissions;Sales equipment lease;Sales;Plastic for casing;$;Variable;costs;(Click to select);Factory maintenance;Plastic for casing;Sales;Sales equipment lease;Administrative expense;$;(Click to select);Assembly worker wages;Cost of goods sold;Factory maintenance;Taxes on factory;Sales equipment lease;(Click to select);Sales;Accounting staff salaries;Wages payable;Drum stands;Admin. mgmt. salaries;(Click to select);Taxes on factory;Cost of goods sold;Sales commission;Factory maintenance;Sales equipment lease;(Click to select);Contribution margin;Gross margin;Fixed;costs;(Click to select);Cost of goods sold;Taxes on factory;Drum stands;Plastic for casing;Sales;(Click to select);Wages of assembly workers;Factory maintenance;Sales;Drum stands;Sales commissions;(Click to select);Factory machinery deprec.;Sales;Cost of goods sold;Salaries;Sales commissions;(Click to select);Plastic for casing;Drum stands;Sales equipment lease;Sales commissions;Sales;(Click to select);Sales;Factory maintenance;Cost of goods sold;Drum stands;Accounting staff salaries;(Click to select);Admin. mgmt. salaries;Wages payable;Plastic for casing;Cost of goods sold;Assembly worker wages;(Click to select);Pretax income;Income tax expense;Income tax;Taxes on factory;Factory maintenance;(Click to select);Drum stands;Income tax;Pretax income;Cost of goods sold;Taxes on factory;(Click to select);Net income;Net loss;$;2.1;Compute its;contribution margin per unit.(Input all amounts as positive values. Omit the "$" sign;in your response.);VINCE DRUM COMPANY;Contribution Margin Income Statement;For Year Ended December 31, 2011;Per unit;(Click to select);Plastic for casing;Cost of goods sold;Sales equipment lease;Sales commissions;Sales;$;Variable;costs;(Click to select);Sales equipment lease;Administrative expense;Plastic for casing;Sales;Factory maintenance;$;(Click to select);Wages payable;Assembly worker wages;Taxes on factory;Factory maintenance;Wages expense;(Click to select);Wages payable;Accounting staff salaries;Drum stands;Admin. mgmt. salaries;Sales;(Click to select);Sales equipment lease;Wages payable;Sales commissions;Wages expense;Taxes on factory;(Click to select);Contribution margin;Gross margin;$;2.2;Compute its contribution margin ratio.(Round your intermediate;and final answer to 2 decimal places. Omit the "%" sign in your;response.);Contribution;margin ratio;%;Edge Equipment Co. manufactures and markets a number of rope;products. Management is considering the future of Product XT, a special rope;for hang gliding, that has not been as profitable as planned. Since Product;XT is manufactured and marketed independently of the other products, its;total costs can be precisely measured. Next year?s plans call for a $180;selling price per 100 yards of XT rope. Its fixed costs for the year are;expected to be $154,800, up to a maximum capacity of 550,000 yards of rope.;Forecasted variable costs are $144 per 100 yards of XT rope.;references;Section Break;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-P3 Graph costs and sales for a single product company.;2.;value:10.00 points;1(a);Estimate Product XT?s break-even point in terms of sales units.;(1 unit = 100 yards.);Break-even;in sales units;units;1(b);Estimate Product XT?s break-even point in terms of sales;dollars.(Do not round your;intermediate calculations. Round your final answers to the nearest whole;number. Omit the "$" sign in your response).;Break-even;in sales dollars;$;check my workeBook Links (2)references;Worksheet;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-P3 Graph costs and sales for a single product company.;3.;value:10.00 points;3.;Prepare a contribution margin income statement showing sales;variable costs, and fixed costs for Product XT at the break-even point.(Leave no cells blank -;be certain to enter "0" wherever required. Input all amounts as;positive values. Omit the "$" sign in your response.);EDGE EQUIPMENT CO.;Contribution Margin Income Statement (at Break-Even) ? Product XT;(Click to select);Sales;Pretax income;Fixed costs;Variable costs;Contribution margin;$;(Click to select);Fixed costs;Variable costs;Contribution margin;Pretax income;Sales;(Click to select);Fixed costs;Variable costs;Pretax income;Contribution margin;Sales;(Click to select);Sales;Contribution margin;Fixed costs;Variable costs;Pretax income;Net income;$;Jetson Co. sold 20,700 units of its only product and incurred a;$83,778 loss (ignoring taxes) for the current year as shown here. During a;planning session for year 2012?s activities, the production manager notes;that variable costs can be reduced 50% by installing a machine that automates;several operations. To obtain these savings, the company must increase its;annual fixed costs by $157,000. The maximum output capacity of the company is;40,000 units per year.;JETSON COMPANY;Contribution Margin Income Statement;For Year Ended December 31, 2011;Sales;$;790,740;Variable;costs;553,518;Contribution;margin;237,222;Fixed;costs;321,000;Net loss;$;(83,778;rev: 02_07_2012;references;Section Break;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective: 18-P2;Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;4.;value:10.00 points;Required;1.;Compute the break-even point in dollar sales for year 2011. (Round your;intermediate calculations to 2 decimal places and final answer to nearest;dollar amount. Omit the "$" sign in your response.);Break-even;point in dollar sales for year 2011;$;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;5.;value:10.00 points;2.;Compute the predicted break-even point in dollar sales for year;2012 assuming the machine is installed and there is no change in the unit;sales price. (Round your intermediate calculations to 2 decimal places and;final answer to nearest dollar amount. Omit the "$" sign in your;response.);Break-even;point in dollar sales for year 2012;$;rev: 02_07_2012;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;6.;value:10.00 points;3.;Prepare a forecasted contribution margin income statement for;2012 that shows the expected results with the machine installed. Assume that;the unit sales price and the number of units sold (20,700 units) will not;change, and no income taxes will be due.(Input all amounts as positive values. Omit the;$" sign in your response.);JETSON COMPANY;Forecasted Contribution Margin Income Statement;For Year Ended December 31, 2012;(Click to select);Sales commissions;Sales;Rent on factory;Income before taxes;Income taxes;$;(Click to select);Income before taxes;Variable costs;Income taxes;Taxes on factory;Factory maintenance;(Click to select);Gross profit;Contribution margin;(Click to select);Taxes on factory;Fixed costs;Sales comissions;Rent on factory;Factory maintenance;Net income;$;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;7.;value:10.00 points;4.;Compute the sales level required in both dollars and units to;earn $189,000 of after-tax income in 2012 with the machine installed and no;change in the unit sales price. Assume that the income tax rate is 30%.(Round your intermediate;calculations to 2 decimal places and always round up (ceiling rounding) your;final answers to the next whole number. Omit the "$" sign in your;response.);Sales;level required in dollars;$;Sales;level required in units;units;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P2 Compute the break-even point for a single product company.;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;8.;value:10.00 points;5.;Prepare a forecasted contribution margin income statement that;shows the results at the sales level computed in part 4. Assume an income tax;rate of 30%.(Use the units in your answer from Part 4 in your calculation of;Sales and Variable Cost. Your Net Income might be higher than required amount;due to rounding. Input all amounts as positive values. Round your "Sales;level required in units" to nearest whole number. Round your;intermediate calculations to 2 decimal places and final answers to the;nearest whole number. Omit the "$" sign in your response.);JETSON COMPANY;Forecasted Contribution Margin Income Statement;For Year Ended December 31, 2012;(Click to select);Rent on factory;Income taxes;Sales;Factory maintenance;Sales commissions;$;(Click to select);Variable costs;Income taxes;Sales commissions;Income before taxes;Factory maintenance;(Click to select);Contribution margin;Gross profit;(Click to select);Sales commissions;Office equipment lease;Factory maintenance;Sales;Fixed costs;(Click to select);Factory maintenance;Income before income taxes;Sales commissions;Taxes on factory;Office equipment lease;(Click to select);Office equipment lease;Rent on factory;Taxes on factory;Income taxes;Sales comissions;(Click to select);Net income;Net loss;$;Letter Co. produces and sells two products, T and O. It;manufactures these products in separate factories and markets them through;different channels. They have no shared costs. This year, the company sold;44,000 units of each product. Sales and costs for each product follow.;Product T;Product O;Sales;$;774,400;$;774,400;Variable;costs;464,640;154,880;Contribution;margin;309,760;619,520;Fixed;costs;187,760;497,520;Income;before taxes;122,000;122,000;Income;taxes (32% rate);39,040;39,040;Net income;$;82,960;$;82,960;references;Section Break;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Difficulty: Hard;Learning Objective;18-P4 Compute the break-even point for a LP22 multiproduct company;9.;value:10.00 points;Required;1.;Compute the break-even point in dollar sales for each product.(Round your contribution;margin ratio to 1 decimal place, other intermediate calculations to 2;decimal places and final answers to the nearest whole dollar amount. Omit the;$" sign in your response.);Product T;$;Product O;$;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P4 Compute the break-even point for a LP22 multiproduct company;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;10.;value:10.00 points;2.;Assume that the company expects sales of each product to decline;to 27,000 units next year with no change in unit sales price. Prepare;forecasted financial results for next year following the format of the;contribution margin income statement as just shown with columns for each of;the two products (assume a 32% tax rate). Also, assume that any loss before;taxes yields a 32% tax savings.(Round your contribution margin ratio to 1 decimal place, other;intermediate calculations to 2 decimal places and final answers to the;nearest whole dollar amount. Input all amounts as positive values except losses and tax;savings on losses, which should be indicated by a minus sign. Omit the;$" sign in your response.);LETTER CO.;Forecasted Contribution Margin Income Statement;Product T;Product O;(Click to select);Taxes on factory;Sales;Sales commissions;Factory maintenance;Office equipment lease;$;$;(Click to select);Variable costs;Rent on factory;Office equipment lease;Sales comissions;Taxes on factory;(Click to select);Contribution margin;Gross profit;(Click to select);Sales comissions;Rent on factory;Factory maintenance;Office equipment lease;Fixed costs;(Click to select);Income before taxes;Sales comissions;Office equipment lease;Rent on factory;Taxes on factory;(Click to select);Office equipment lease;Taxes on factory;Sales comissions;Rent on factory;Income taxes;Net;income/loss;$;$;check my workeBook Links (3)references;Worksheet;Learning Objective;18-A1 Compute the contribution margin and describe what it reveals about a;company?s cost structure.;Learning Objective;18-P4 Compute the break-even point for a LP22 multiproduct company;Difficulty: Hard;Learning Objective;18-C2 Describe several applications of costvolume- profit analysis.;11.;value:10.00 points;3.;Assume that the company expects sales of each product to;increase to 58,000 units next year with no change in unit sales price.;Prepare forecasted financial results for next year following the format of;the contribution margin income statement shown with columns for each of the;two products (assume a 32% tax rate).(Round your contribution margin ratio to 1;decimal place, other intermediate calculations to 2 decimal places and final;answers to the nearest whole dollar amount. Input all amounts as positive values except;losses and tax savings on losses, which should be indicated by a minus sign.;Omit the "$" sign in your response.);LETTER CO.;Forecasted Contribution Margin Income Statement;Product T;Product O;(Click to select);Taxes on factory;Rent on factory;Sales comissions;Sales;Office equipment lease;$;$;(Click to select);Factory maintenance;Rent on factory;Taxes on factory;Variable costs;Office equipment lease;(Click to select);Contribution margin;Gross profit;(Click to select);Rent on factory;Taxes on factory;Factory maintenance;Fixed costs;Office equipment lease;(Click to select);Income before taxes;Factory maintenance;Taxes on factory;Rent on factory;Sales commissions;(Click to select);Taxes on factory;Income taxes;Office equipment lease;Factory maintenance;Sales comissions;(Click to select);Net loss;Net income;$;$;National Co. manufactures and sells three products: red, white;and blue. Their unit sales prices are red, $65, white, $95, and blue, $120.;The per unit variable costs to manufacture and sell these products are red;$50, white, $70, and blue, $90. Their sales mix is reflected in a ratio of;2:2:1 (red:white:blue). Annual fixed costs shared by all three products are;$160,000. One type of raw material has been used to manufacture all three;products. The company has developed a new material of equal quality for less;cost. The new material would reduce variable costs per unit as follows: red;by $7, white, by $17, and blue, by $7. However, the new material requires new;equipment, which will increase annual fixed costs by $30,000.;Required;1.;Assume if the company continues to use the old material;determine its break-even point in both sales units and sales dollars of each;individual product.(Always round your composite units up (ceiling rounding) to next;whole unit. Then use the Sales Units to calculate Sales Dollars. Round up;your composite units to whole number. Omit the "$" sign in your;response.);Break-Even Points;Sales Units;Sales Dollars;Red at break-even;$;White at;break-even;$;Blue at;break-even;$;2.;Assume if the company uses the new material, determine its new;break-even point in both sales units and sales dollars of each individual;product.(Always round your;composite units up (ceiling rounding) to next whole unit. Then use the Sales;Units to calculate Sales Dollars. Round up your composite units to whole;number. Omit the "$" sign in your response.);Break-Even Points;Sales Units;Sales Dollars;Red at;break-even;$;White at;break-even;$;Blue at;break-even;$

 

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