Question

elect 1: CVP Income Statement (10 points) your Excel file to Moodle Do NOT email your filel itu a lawn mower manufacturer: Instructie Prepare your solutions in Excel, and upload the deadline specified by your instructor. Do NOT email ve The following information pertains to Crescent City, a lawn mow $ 1 Budgeted production costs for the coming year: a. Direct materials per mower b. Direct labor per mower c. Variable overhead per mower d. Total fixed overhead 250 130 70 33,500 2 50 Budacted selling and administrative costs for the coming year: a. Fixed selling & adm expense $ 52,900 b. Sales commission per mower od sell 1,500 mowers at a price 3. In the coming year, Crescent City plans to produce and sell 1.500 m of $590 each. Instructions for Project 1: 1. Prepare a CPV income statement. 2. Calculate the breakeven point in units and sales dollars. 3. Calculate the margin of safety. 4. Calculate the margin of safety ratio. 5. If Crescent City wants to earn net income of $100,000, how many unit, it sell?

Answer 1

Project 1)
Total Variable costs = DM+DL+VO+SC = 250+130+70+50= 500
Total Fixed costs = 33500 + 52900 = 86400
Req1) CPV INCOME STATEMENT:
Units sold		1500
	Per unit	Amount $
Sales	590	885000
Less:Variable costs:	500	750000
Contribution	90	135000
Less:Fixed costs		86400
Net Operating Income		48600
Req2) Break even point (units) = FC / Contribution per unit
BEP (units) = 86400 / 90 = 960 units
BEP (in $) = 960 * 590 = $566400			318600
Req3) Margin of Safety = Sales - BE Sales = 885000 - 566400 = $318600
Req4) Margin of Safety ratio = (Sales - BE Sales)/Sales = 318600/885000 = 36%
Req5) To earn net income of $100000, the total contribution required=
FC + expected NI = 86400 + 100000 = 186400
Units required to sell = Exp. Contribution/contribution per unit =
186400 / 90 =2071.11 or 2072 units