Gorrells and Sunn builds high-quality homes ranging in price from $200,000 to $1 million. John Ellis, a local physician, has asked Gorrells and Sunn to show him some house plans. Dr. Ellis has selected a plan that calls for $300,000 in building materials, $180,000 in labor, and $40,000 in add-ons, but he doesn”t want to pay more than $575,000 for his home. Gorrells and Sunn […]

Fashion Headwear, Ltd., operates a chain of exclusive ski hat boutiques in the western United States. The stores purchase several hat styles from a single distributor at $18 each. All other costs incurred by the company are fixed. Fashion Headwear, Ltd., sells the hats for $30 each. Required If fixed costs total $150,000 per year, what is the breakeven point in units? In sales dollars? […]

Scott Confectionary sells its Stack-o-Choc candy bar for $0.80. The variable cost per unit for the candy bar is $0.45; total fixed costs are $175,000. Required What is the contribution margin per unit for the Stack-o-Choc candy bar? What is the contribution margin ratio for the Stack-o-Choc candy bar? What is the breakeven point in units? In sales dollars? If an increase in chocolate prices […]

Three years ago, Marissa Moore started a business that creates and delivers holiday and birthday gift baskets to students at the local university. Marissa sells the baskets for $25 each, and her variable costs are $15 per basket. She incurs $12,000 in fixed costs each year. Required How many baskets will Marissa have to sell this year if she wants to earn $30,000 in operating […]

Math Tot sells a learning system that helps preschool and elementary students learn basic math facts and concepts. The company”s income statement from last month is as follows: Total Per Unit Sales $600,000 $12.00 Variable expenses 350,000 7.00 Contribution margin 250,000 $ 5.00 Fixed expenses 175,000 Operating income $ 75,000 Required What is Math Tot”s contribution margin ratio? Its variable cost ratio? What is Math […]

Clarkson Computer Company distributes a specialized wrist support that sells for $30. The company”s variable costs are $12 per unit; fixed costs total $360,000 a year. Required If sales increase by $39,000 per year, by how much should operating income increase? Last year, Clarkson sold 32,000 wrist supports. The company”s marketing manager is convinced that a 5% reduction in the sales price, combined with a […]

Matoaka Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $40 throughout the country to loyal alumni of over 1,000 schools. Matoaka”s variable costs are 40% of sales; fixed costs are $120,000 per month. Required What is Matoaka”s annual breakeven point in sales dollars? Matoaka currently sells 100,000 blankets per year. If sales volume were to […]

Wimpee”s Hamburger Stand sells the Super Tuesday Burger for $3.00. The variable cost per hamburger is $1.75; total fixed cost per month is $25,000. Required How many hamburgers must Wimpee”s sell per month to break even? How many hamburgers must Wimpee”s sell per month to make $6,000 in operating income? Prepare a CVP graph for Wimpee”s. Assuming that the most hamburgers Wimpee”s has ever sold […]

Mary Smith sells gourmet chocolate chip cookies. The results of her last month of operations are as follows: Sales revenue $50,000 Cost of goods sold (all variable) 26,000 Gross margin 24,000 Selling expenses (20% variable) 8,000 Administrative expenses (60% variable) 12,000 Operating income $ 4,000 Required What is Mary”s degree of operating leverage? If Mary can increase sales by 10%, by how much will her […]

Abado Profiles provides testing services to school districts that wish to assess students” reading and mathematical abilities. In 2010 Abado evaluated 60,000 math tests and 20,000 reading tests. An income statement for 2010 follows. Math Testing Reading Testing Total Company Total Per Unit Total Per Unit Sales $1,200,C00 $20 $720,000 $36 $1,920,000 Variable costs 840,000 14 360,000 18 1,200,000 Contribution margin $ 360,000 $ 6 […]