Traveler Aids, Housewares Inc., Strong Wood Company, Sharpens Inc., Soccer Nets

1) Travelers Aids most recent Income statement follows

Total                                                                     Per Unit

   Sales (3000 units)                 $90,000                 $30.00

  Variable expenses                   $54,000                 $18.00

 Contribution Margin                       $36,000                 $12.00

 Fixed expenses                              $22,000

 Net operating income                    $14,000

Prepare a new contribution format income statement under the following condition: The sales volume increased by 150 units.  (New sales are 3,150 Units)

 

2) Housewares Inc. distributes a single product, food processors whose selling price is $200 and whose variable cost is $140 per unit. The company’s monthly fixed expense is $18,000.

    A) What is the company’s breakeven point in unit sales using the equation method? Show computations.

    B) What is the company’s breakeven point in sales dollars using the contribution margin method with the CM ratio? Show computations.

 

3)  Strong wood company is a distributor of patio furniture.  Data concerning the next month’s budget appear below

Selling price                                        $290 per unit

Variable expense                             $174 per unit

Fixed expenses                                $158,000 per month

Unit sales                                            1,500 units per month

A)     What is the company’s margin of safety? Show computations.

B)     What is the company’s margin of safety as a percentage of sales? Show computations.

 

4)  Sharpens inc. produces knife sets for use in commercial kitchens.  They sell them for $400 each. Selected data for the company’s operations last year follow.

Units in beginning inventory                                0

Units produced                                                  3,000

Units sold                                                          2,500

Units in ending inventory                                        500

Variable cost per unit:

Direct materials                                                    $120

Direct Labor                                                             80

Variable manufacturing overhead                               40

Variable selling administrative                                    20

Fixed costs:

Fixed manufacturing overhead                             $300,000

Fixed selling and administrative                            $200,000

 

A) Assume that the company uses variable costing. Compute the unit cost for one knife set. Show computations.

B) Assuming that the company uses absorption costing, compute the unit cost for one knife set. Show computations.

 

5) Soccer nets used for professional games they sell them for $200 each. Selected data for the company’s operations last year follow:

Units in beginning inventory                            0

Units produced                                           500

Units Sold                                                  300

Units in ending inventory                             200

Variable costs per unit:

Direct materials                                        $75

Direct labor                                                 30

Variable manufacturing overhead                   10

Variable selling and administrative                 5

Fixed costs:

Fixed Manufacturing overhead                 $2,000

Fixed selling and administrative                $1,000

 

A)  Assume that the company uses variable costing. Compute the net operating income. Show computations.

B) Assuming that the company uses absorption costing, compute the net operating income. Show computations.