Coffee Klatch

Ratios
Sales 3,129.00 100%
Variable cost - 756.00 24%
Contribution margin 2,373.00 76%
Fixed cost - 1,300.00 42%
Net income 1,073.00 34%

Contribution margin ratio 76%

Part I. The Garry Corporation's most recent contribution format income statement is shown below

Accounts Total Per unit

Sales (15,000) 225,000.00 15.00
Variable expense 135,000.00 9.00
Contribution margin 90,000.00 6.00
Fixed expense 35,000.00
Net operating income 55,000.00

a. The sales volume increases by 10% and the price decreases by $0.50 per unit.

Accounts Total Per unit

Sales (16,500) 239,250.00 14.50
Variable expense 148,500.00 9.00
Contribution margin 90,750.00 5.50
Fixed expense 35,000.00
Net operating income 55,750.00

b. The selling price decreases $1.00 per unit, fixed expenses increase by $15,000,
and the sales volume decreases by 5%

Accounts Total Per unit

Sales 199,500.00 14.00
Variable expense 128,250.00 9.00
Contribution margin 71,250.00 5.00
Fixed expense 50,000.00
Net operating income 21,250.00

c. The selling price increases by 25%, variable expense increases by $0.75 per unit,
and the sales volume decreases by 15%.

Accounts Total Per unit

Sales 239,062.50 18.75
Variable expense 124,312.50 9.75
Contribution margin 114,750.00 9.00
Fixed expense 35,000.00
Net operating income 79,750.00
d. The selling price increases by $1.50 per unit, variable cost increases by $1.00 per unit,
fixed expenses decrease by $15,000, and sales volume decreases by 12%.
Accounts Total Per unit
Sales 217,800.00 16.50
Variable expense 132,000.00 10.00
Contribution margin 85,800.00 6.50
Fixed expense 20,000.00
Net operating income 65,800.00
is shown below Part II. Spencer Company's most recent monthly contribution format income state

Sales
Variable cost
Contribution margin
Fixed cost
Net loss

The company sells its only product for $10 per unit. There were no beginning or e

a. What are total sales in dollars at the break-even point?

Column1
Sales
Variable cost
Contribution margin
Fixed cost
Net income

Dollar sales = 18,000 Fixed cost / 25%

Units
14,250 b. What are total variable expenses at the break-even point?

c. What is the company's contribution margin ratio?

d. If unit sales were increased by 10% and fixed expenses were reduced by $2,00
what would be the company's expected net operating income? (Prepare a new inc

Column1
Sales
Units Variable cost
12,750 Contribution margin
Fixed cost
Net income
Units
13,200
y's most recent monthly contribution format income statement is given below

60,000.00
45,000.00
15,000.00 25%
18,000.00
- 3,000.00

y product for $10 per unit. There were no beginning or ending inventories.

dollars at the break-even point?

Total Per unit Units

72,000.00 10 7,200.00
54,000.00 7.5
18,000.00 2.5
18,000.00
-

ed cost / 25% 72,000.00

expenses at the break-even point? 54,000.00

contribution margin ratio? 25%

ased by 10% and fixed expenses were reduced by $2,000,

ny's expected net operating income? (Prepare a new income statement.)

Total Per unit Units

66,000.00 10 6,600.00
49,500.00 7.5
16,500.00 2.5
16,000.00
500.00
Part III. Merlin Enterprises manufactures a cellular telephone.
The company's partial contribution format income statement for the most recent year is below.

Column1 Total Per unit

Sales 300,000.00 60.00
Variable cost 165,000.00 33.00
Contribution margin 135,000.00 27.00
Fixed cost 108,000.00
Net income 27,000.00

a. Complete the contribution income statement above

b. Determine the breakeven sales and units using either the equation or the contribution approach.

Breakeven sales = 108,000 / 45% 240,000.00

Breakeven units = 108,000 / 27 4000

c. Determine the sales necessary to earn a profit of $54,000.

Peso sales to attain 54,000 target profit 360,000.00

Column1 Total Per unit

Sales 360,000.00 72.00
Variable cost 198,000.00 39.60
Contribution margin 162,000.00 32.40
Fixed cost 108,000.00
Net income 54,000.00

d. Determine the margin of safety percentage for the year above.

Total sales 300,000.00

Break even sales 240,000.00
Margin of safety 60,000.00
Divided by actual sales 300,000.00
Margin of safety % 20%
 Part IV. Rachal Corporation produces and sells a single product whose
and whose variable expense is $57.00 per unit. The company's monthl

Ratio a. Assume the company's monthly target profit is $9,300. Determine the
100%
55% Column1
45% Sales
Variable expense
Contribution margin
Fixed expense
Net operating income

Unit sales to attain target profit

b. Assume the company's monthly target profit is $18,600. Determine th

Column1
Sales
Variable expense
Contribution margin
Fixed expense
Ratio Net operating income
100%
55% Peso sales to attain target profit
45%
ation produces and sells a single product whose selling price is $150.00 per unit
pense is $57.00 per unit. The company's monthly fixed expense is $381,300

ny's monthly target profit is $9,300. Determine the unit sales to attain that target profit.

Total Per unit Units

630,000.00 150.00 4,200.00
239,400.00 57.00
390,600.00 93.00
381,300.00
9,300.00

9,300.00 4,200.00

ny's monthly target profit is $18,600. Determine the dollar sales to attain that target profit

Total Per unit Ratio Units

645,000.00 150.00 100% 4300
245,100.00 57.00 38%
399,900.00 93.00 62%
381,300.00
18,600.00

18,600.00 645,000.00
Part V. Mcquage Corporation has provided its contribution format income statement for July.

Column1 Total Per unit

Sales 558,000.00
Variable expense 306,900.00
Contribution margin 251,100.00
Fixed expense 209,800.00
Net operating income 41,300.00

a. Compute the degree of operating leverage to two decimal places

DOL = Contribution margin / Net operating income 6.08

b. Using the degree of operating leverage, estimate the percentage change in

net operating income that should result from a 19% increase in sales.

% Change in Net Operating Income 115.52%

 Part VI. Brancati Inc. produces and sells two products. Data concerning those products for the most

Units Column1 Product W07C

Sales 25,000.00
Variable expenses 7,000.00
Contribution margin 18,000.00
Fixed expense
Net operating income

Fixed expenses for the entire company were $32,860.

a. Determine the overall break-even point for the company.

Column1 Product W07C

Sales 25,000.00
Variable expenses 7,000.00
Contribution margin 18,000.00
Fixed expense
Net operating income

Weighted Contribution Margin Ratio

Peso sales to break even point

b. If the sales mix shifts toward Product W07C with no change in total sales, what will happen to the

The breakeven point will decreased since the CM % of Product W0

Data concerning those products for the most recent month appear below: Part VII. Veren Inc. produces and sells two products. During
and its variable expenses were $9,450. Product L75P's sales
Product B29Z Total The company's fixed expenses were $21,060.
27,000.00 52,000.00
8,600.00 15,600.00 a. Determine the overall break-even point for the company
18,400.00 36,400.00
32,860.00 Column1
3,540.00 Sales
Variable expenses
Contribution margin
Fixed expense
Net operating income

WCM Ratio
Product B29Z Total
27,000.00 52,000.00 Peso sales to break even
8,600.00 15,600.00
18,400.00 36,400.00
32,860.00 b. If the sales mix shifts toward Product F73A with no change
3,540.00

70%

46,942.86

hange in total sales, what will happen to the break-even point for the company?

will decreased since the CM % of Product W07C is greater than the other product.
n Inc. produces and sells two products. During the most recent month, Product F73A's sales were $27,000
e expenses were $9,450. Product L75P's sales were $14,000 and its variable expenses were $5,310.
s fixed expenses were $21,060.

he overall break-even point for the company

Product F73A Ratio Product L75P Ratio2 Total

27,000.00 100% 14,000.00 41,001.00
9,450.00 5,310.00 14,760.00
17,550.00 65% 8,690.00 62% 26,240.65
21,060.00
5,180.65

64%

32,906.24

mix shifts toward Product F73A with no change in total sales, what will happen to the break-even point for the company?

The breakeven point will decreased since the CM % of Product F73A is greater than the other product.
Part VIII. Acme Company's product sells for $80 and has a variable cost per unit of $60. Fixed costs are $400,000.

a. Compute the break-even point in dollars.

Column1 Total Per unit Ratio

Sales 1,600,000.00 80.00 100%
Variable costs 1,200,000.00 60.00 75%
Contribution margin 400,000.00 20.00 25%
Fixed costs 400,000.00
Net income -

Peso sales to break even 1,600,000.00

b. Compute the number of units must Acme sell to earn a $100,000 profit.

Column1 Total Per unit Units

Sales 2,000,000.00 80.00 25,000.00
Variable costs 1,500,000.00 60.00
Contribution margin 500,000.00 20.00
Fixed costs 400,000.00
Net income 100,000.00

Unit sales to attain target profit 100,000.00 25,000.00

c. Acme has a target profit of $152,000 and expects to sell 30,000 units.
Compute the selling price Acme must charge to earn the target profit.

Column1 Total Per unit Units

Sales 2,352,000.00 78.40 30,000.00
Variable costs 60.00
Contribution margin 552,000.00 18.40
Fixed costs 400,000.00
Net income 152,000.00

Selling price to attain target profit 78.40

Target profit 152,000.00

d. Acme wants to keep its selling price at $80 per unit and earn a 10% return on sales.
Calculate the number of units Acme must sell to meet the target.

Column1 Total Per unit Ratio

Sales 2,666,666.67 80.00 100%
Variable costs 60.00
Contribution margin 666,666.67 20.00 25%
Fixed costs 400,000.00
Net income 266,666.67

Target ROS 10%

Dollar sales to attain target ROS 2,666,666.67

Unit sales to attain target ROS 33,333.33

Column1 Total Per unit
Sales 80,000.00 16.00
Variable cost 30,000.00 6.00
Contribution margin 50,000.00 10.00
Fixed cost 25,000.00
Net operating income 25,000.00

Indifference point

500,000 + 20Q = 650,000 + 17Q

3Q = 150,000
50,000 = Q

Break even volume first second

Sales 400,000.00 500,000.00

Variable cost 200,000.00 250,000.00
Contribution margin 200,000.00 250,000.00
Fixed cost 160,000.00 160,000.00
Net operating income 40,000.00 90,000.00

Units to attain break even 320,000.00

Units to attain profit after tax

Units to attain profit after tax = ((fixed cost + after tax profit/1-tax %))/CM per unit

Sales in units 60,000.00

Variable cost per unit 2.00
Fixed cost 50,000.00
Selling price 7.00
Tax rate 25%
Contribution margin per unit 5.00
Target profit 30,000.00
Units sales to attain PAT 18,000.00

Break even
Sales
Variable cost 150,000.00
Contribution margin
Fixed cost 180,000.00
PBT
Income tax
NOI -

Sales 75,000.00
Variable cost
Contribution margin
Fixed cost
PBT
 Column1 Product A Per unit Product B
Units Sales - 10.00 15,000.00
5,000.00 Variable cost 14,000.00 7.00 9,000.00
Contribution margin 6,000.00 3.00 6,000.00
Fixed cost
Net income

Units to attain target profit

Target profit 12,000.00

WCM ratio 34%

Peso sales to attain target profit 87,500.00

Units Ratio Column1
Peso sales to attain BE 52,500.00
1,000,000.00 21,000.00
500,000.00
500,000.00 0.5

8%

ax profit/1-tax %))/CM per unit

 100%
37.5%
62.50%
24.5
38%
25%
13%

37500
Ratio2 Total Column1 Total Per unit
5.00 35,000.00 Sales 80,000.00 16
3.00 23,000.00 Variable cost 30,000.00 6
2.00 12,000.00 Contribution margin 50,000.00 10
18,000.00 Fixed cost 26,000.00
Net operating income 24,000.00

Break even Total Per unit

Sales 41,600.00 16
Variable cost 6
Contribution margin 26,000.00 10
Fixed cost 26,000.00
Net operating income -

Margin of safety 38,400.00

Ratio
100%
37.50%
62.50%

Ratio Units
100%
37.50%
62.50% 2,600