The Peace Company and Suzy Manufacturing __100% Correct w/ Solutions!

Problem 1:

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

 

  

 

 

 

 

 

factory overhead

 

 

factory overhead

  

   

 Variable

 

 Fixed

  

  

Sales	($50 * 100,000 units)	$5,000,000
Cost of goods sold
Direct materials	$1,200,000
Direct labor	$950,000
	Variable	$600,000
	Fixed	$850,000	$3,600,000
Gross profit	$1,400,000
Selling and administrative expense
$250,000
$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