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 […]

The following is Talley Company”s 2010 income statement. Sales revenue $540,000 Cost of goods sold 324,000 Gross margin 216,000 Operating expenses 126,000 Operating income $ 90,000 Required What is the markup percentage on cost of goods sold? What is the markup percentage on total cost? What is the gross margin percentage? If the company wants to sell a new product that costs $42 wholesale while […]

Pet Designs makes various accessories for pets. Their trademark product, Pet Bed, is perceived to be high quality but not extravagant, and is sold in a variety of pet stores. Wanda Foster, marketing manager, has convinced her boss that they are missing an important segment of the market. “We can increase the quality of the material and design and market Pet Bed to a higher-end […]

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 […]