Sunn Company manufactures a single product that sells for $180 per unit and whose variable costs are $135 per unit. The company's annual fixed costs are $562,500. The sales manager predicts that next year's annual sales of the company's product will be 40,000 units at a price of $200 per unit. Variable costs are predicted to increase to $140 per unit, but fixed costs will remain at $562,500. What amount of income can the company expect to earn under these predicted changes? Prepare a contribution margin income statement for the next year. SUNN COMPANY Contribution Margin Income Statement Units $ per unit Contribution margin
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Step 1: Calculate the total sales revenue Sales revenue = 40,000 units x $200 = $8,000,000 Show more…
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Kubin Company's relevant range of production is 13,000 to 18,000 units. When it produces and sells 15,500 units, its average costs per unit are as follows: Average Cost per Unit Direct materials: $7.40 Direct labor: $4.40 Variable manufacturing overhead: $1.90 Fixed manufacturing overhead: $5.40 Fixed selling expense: $3.90 Fixed administrative expense: $2.90 Sales commissions: $1.40 Variable administrative expense: $0.90 Exercise 1-10 (Algo) Differential Costs and Sunk Costs [LO1-5] Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 15,500 to 15,501 units? 2. What is the incremental cost incurred if the company increases production and sales from 15,500 to 15,501 units? 3. Assume that Kubin Company produced 15,500 units and expects to sell 15,260 of them. If a new customer unexpectedly emerges and expresses interest in buying the 240 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 15,500 units and expects to sell 15,260 of them. If a new customer unexpectedly emerges and expresses interest in buying the 240 extra units that have been produced by the company and that would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?
Akash M.
The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below. Central Valley Company Comparative Income Statement March April May June Sales in units 6,200 5,700 7,050 8,400 Sales revenue $762,600 $701,100 $867,150 $1,033,200 Less: Cost of goods sold 402,800 378,594 450,918 526,932 Gross margin $359,800 $322,506 $416,232 $506,268 Less: Operating Expenses Shipping expense $63,900 $53,600 $67,400 $65,000 Advertising expense 88,000 88,000 88,000 88,000 Salaries and commissions 164,400 137,000 167,500 171,500 Insurance expense 15,000 15,000 15,000 15,000 Amortization expense 48,000 48,000 48,000 48,000 Total operating expenses $379,300 $341,600 $385,900 $387,500 Net income $(19,500) $(19,094) $30,332 $118,768 Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behavior. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.) 2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 79,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) 3. Calculate the change in profit if the selling price were reduced by $10.5 each and annual sales were to increase by 7,400 units. 4. Determine the change in profit if the company were to increase advertising by $112,000 and if this were to increase sales by 7,400 units.
Madhur L.
Kubin Company’s relevant range of production is 18,000 to 22,000 units. When it produces and sells 20,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials . . . . . . . . . . . . . . . . . . . . . . . . . $7.00 Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4.00 Variable manufacturing overhead . . . . . . . . . $1.50 Fixed manufacturing overhead . . . . . . . . . . . $5.00 Fixed selling expense . . . . . . . . . . . . . . . . . . . $3.50 Fixed administrative expense . . . . . . . . . . . . . $2.50 Sales commissions . . . . . . . . . . . . . . . . . . . . . . $1.00 Variable administrative expense . . . . . . . . . . $0.50 Required: 1. Assume the cost object is units of production: a. What is the total direct manufacturing cost incurred to make 20,000 units? b. What is the total indirect manufacturing cost incurred to make 20,000 units? 2. Assume the cost object is the Manufacturing Department and that its total output is 20,000 units: a. How much total manufacturing cost is directly traceable to the Manufacturing Department? b. How much total manufacturing cost is an indirect cost that cannot be easily traced to the Manufacturing Department? 3. Assume the cost object is the company’s various sales representatives. Furthermore, assume that the company spent $50,000 of its total fixed selling expense on advertising and the remainder of the total fixed selling expense comprised the fixed portion of the company’s sales representatives’ compensation: a. When the company sells 20,000 units, what is the total direct selling expense that can be readily traced to individual sales representatives? b. When the company sells 20,000 units, what is the total indirect selling expense that cannot be readily traced to individual sales representatives? 4. Are Kubin’s administrative expenses always going to be treated as indirect costs in its internal management reports?
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