Question

Hoping to get help on parts 5 and 6 on this assignment. ESPECIALLY part 5, so if you can only help with that one I'll happily take it. Thank you!
Coffee Perfection, Inc. makes two products - Dream Coffee Machine and Out-Of-This-World Coffee Machine. Selected information on the products is given below: Dream Coffee Machine Out-Of-This-World Coffee Machine Selling Price per unit: $1,000.00 $5,000.00 Variable expenses per unit: Production $490.00 $4,000.00 Commission (5% of selling price) $50.00 $250.00 The company has the following fixed costs: Fixed production costs Advertising expense Administrative salaries Total: Per Month $650.000 1.000.000 400.000 2.050.000 Sales, in units, over the past two months have been as follows: February (units sold) March (units sold) Dream Coffee Machine Out-Of-This-World Coffee Machine 20,000 5,000 15,000 6,000 Total 25,000 21,000 Required: 1. Prepare contribution income statements for February and March. Use Exhibit 5-4 on page 211 as an example. 2. Compute the company's break-even point (BEP) in dollar sales for February and March. 3. To meet customer demand the company decides to use new technology for the Out-Of-This-World Coffee Machine starting in the month of April. This decision drives the production cost to $4,500 per unit. Prepare a contribution income statement for April assuming that the company had the following sales activity: Dream Coffee Machine Out-Of-This-World Coffee Machine Total | April (units sold) 10,000 10,500 20,500 4. Compute the company's break-even point in dollar sales for April.

Answer 1

Requirement 5: Prepare contribution margin income statement as follows

Particulars	Dream Machine	Out-Of-This World Machine	Total	Percentage
Sales Revenue	$10,000,000	$52,500,000	$62,500,000	100%
Deduct: Total Variable Costs	($4,900,000)	($47,250,000)	($52,150,000)	-83%
Contribution Margin	$5,100,000	$5,250,000	$10,350,000	17%
Deduct: Total Fixed Costs			($3,950,000)
Net income			$6,400,000

Compute break-even sales in dollars as follows

Particulars	Amount
Total fixed costs	$3,950,000
÷ Contribution margin ratio	17%
Break even sales in dollars	$23,852,657

Notes:

Total sales revenue	Dream Machine	Out-Of-This World Machine	Total
Expected sales in units	10,000	10,500	20,500
× Selling price per unit	$1,000	$5,000
Sales Revenue	$10,000,000	$52,500,000	$62,500,000
Total variable costs
Expected sales in units	10,000	10,500	20,500
× Variable cost per unit	$490	$4,500
Total variable costs	$4,900,000	$47,250,000	$52,150,000
Total fixed costs
Fixed production costs	$650,000
Salaries expense	$1,900,000
Advertising expenses	$1,000,000
Administrative salaries	$400,000
Total fixed costs	$3,950,000