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Chapter 20: Q26E (page 1126)

Complete the table below for the missing amounts:

A B C

Number of units 2,064 units (d) 2,570 units

Sales price per unit \( 250 \) 125 $ (g)

Variable costs per unit (a) 50 4,528

Contribution margin per unit 125 (e) (h)

Total contribution margin (b) 1,567,500 (i)

Contribution margin ratio (c) (f) 20%

Short Answer

Expert verified

Answer

1. (a) $125

2. (b) $258,000

3. (c) 50%

4. (d) 20,900

5. (e) $75

6. (f) 60%

7. (g) $5,660

8. (h) $1,132

9. (i) $2,909,240

Step by step solution

01

Calculation of sub-part (a),(b), and (c)

A

Number of units 2,064

Sales price per unit $250

Variable cost per unit (Sales price per unit-Contribution margin per unit) (a) $125 ($250-$125)

Contribution margin per unit $125

Total contribution margin (b) (2,064 x $125) (b) $258,000

Contribution margin ratio (c) ($125/250) (c) 50%

02

Calculation of sub-part (d),(e), and (f)

Number of units ($1,567,500/$75) (d) 20,900

Sales price per unit $125

Variable cost per unit $50

Contribution margin per unit (Sales price per unit- Variable cost) (e) $75

Total contribution margin 1,567,500

Contribution margin ratio ($75/$125) (f) 60%

03

Calculation of sub-part (g), (h), and (i)

Number of units 2,570

Sales price per unit ($4,528/(1-20%)) (g) $5,660

Variable cost per unit (a) $4,528

Contribution margin per unit (Sales price per unit- Variable

cost) ($5,660-$4,528) (h) $1,132

Total contribution margin (b) ($1,132 x 2,570) (i) $2,909240

Contribution margin ratio (c) ($1,132 / $5,660) 20%

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Most popular questions from this chapter

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Question: Use the following information to complete Short Exercises S20-10 through S20-15.

Funday Park competes with Cool World by providing a variety of rides. Funday Park sells tickets at \(70 per person as a one-day entrance fee. Variable costs are \)42 per person, and fixed costs are $170,800 per month.

S20-10 Computing contribution margin per unit, breakeven point in sales units

Compute the contribution margin per unit and the number of tickets Funday Park must sell to break even. Perform a numerical proof to show that your answer is correct.

Calculating breakeven point for two products, margin of safety, andoperating leverage

The contribution margin income statement of Delectable Donuts for May 2018follows:

DELECTABLE DONUTS

Contribution Margin Income Statement

Month Ended May 31, 2018

Net Sales Revenue

\(125,000

Variable cost

Cost of goods sold

\)32,100

Selling cost

17,400

Administrative cost

500

\(50,000

Contribution Margin

\)75,000

Fixed cost

Selling cost

\(37,800

Administrative cost

12,600

\)50,400

Operating income

\(24,600

Delectable sells five dozen plain donuts for every dozen custard-filled donuts. A dozenplain donuts sells for \)4.00, with a variable cost of \(1.60 per dozen. A dozen custardfilled donuts sells for \)8.00, with a variable cost of $3.20 per dozen.

Requirements

1. Calculate the weighted-average contribution margin.

2. Determine Delectable鈥檚 monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution nmargin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.

3. Compute Delectable鈥檚 margin of safety in dollars for May 2018.

4. Compute the degree of operating leverage for Delectable Donuts. Estimate thenew operating income if total sales increase by 20%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar.Assume the sales mix remains unchanged.)

5. Prove your answer to Requirement 4 by preparing a contribution marginincome statement with a 20% increase in total sales. (The sales mix remainsunchanged.)

Of the three approaches to calculate sales required to achieve the breakeven point, which one(s) calculate the required sales in units and which one(s) calculate the required sales in dollars?
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