Indicate whether each of the following is true (T) or false (F) in the space provided. 1. Present value is based on three variables: (1) the dollar amount to be received (future amount), (2) the probability of receiving that amount in the future, and (3) the interest rate (the discount rate). 2. The process of determining the present value is referred to as discounting the […]

The Robinson Company sells sports decals that can be personalized with a player”s name, a team name, and a jersey number for $5 each. Robinson buys the decals from a supplier for $1.50 each and spends an additional $0.50 in variable operating costs per decal. The results of last month”s operations are as follows: Sales $10,000 Cost of goods sold 3,000 Gross profit 7,000 Operating […]

Festive Foods Caterers” income statement for last month follows. What is Festive Foods” degree of operating leverage? Sales $200,000 Variable expenses 60,000 Contribution margin 140,000 Fixed expenses 120,000 Net operating income $ 20,000

CB Markets imports and sells small bear-shaped piñatas. In planning for the coming year, the company”s owner is evaluating several scenarios. For each scenario under consideration, prepare a contribution margin income statement showing the anticipated operating income. Consider each scenario independently. Last year”s income statement 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 […]

Use this income statement and your calculations from the Unit 3.1 Practice Exercise to answer the following questions. Sales ($50 per unit) $5,000 Less: Cost of goods sold ($32 per unit) 3,200 Gross margin 1,800 Less operating expenses: Salaries $800 Advertising 400 Shipping ($2 per unit) 200 1,400 Operating Income $ 400 How many units would the company need to sell to earn $2,000 in […]

SND, Inc., had the following results for 2010: Prepare a new income statement for each of the following scenarios. Consider each scenario independently. Total Per Unit Sales $2,000,000 $20.00 Variable expenses 1,250,000 12.50 Contribution margin 750,000 $ 7.50 Fixed expenses 400,000 Operating income $ 350,000 Prepare a new income statement for each of the following scenarios. Consider each scenario independently. Required Sales volume decreases by […]

Assume a company sells 10,000 units –5,000 of product A and 5,000 of product B. Product A has a contribution margin of $6.00 per unit, while Product B has a contribution margin of $4.00 per unit. If the sales mix changes to 5,500 units of Product A and 4,500 units of product B, which of the following is true? The company will make more money […]

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 […]