Question

question 4

Carbex, Inc. produces Cutlery sets out of high quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $62, and the Deluxe set sells for $77. The variable expenses associated with each set are given below. Variable production costs Sales commissions (168 of sales price) Standard Deluxe $16.00 $31.00 $ 9.92 $12.32 The company's fed expenses each month are: Advertising $106,000 Depreciation $ 22,000 Administrative $ 63,500 Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steady over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current month-May-are down substantially from April. Sales, in sets, for the last two months are given below. Standard Deluxe Total 4.100 2.100 6.200 1.100 5.100 6,200 May Required: 1. Prepare contribution format income statements for April b. Prepare contribution format income statements for May 3-a. Compute the break-even point in dollar sales for April 3-. Would the break even point in May be higher or lower than the break even point in April? Complete this question by entering your answers in the tabs below. Reg 1A Req 18 Req 3A Req 3B Prepare contribution format income statements for April. (Round your "Percentage answers to 1 decimal place (ie. .1234 should be entered as 12.3).) Carbex, Inc income Statement For April Standard Deluxe Amount Amount Amour 2224 Fixed expen

Answer 1

Contribution margin format income statement for April
Carbex Inc
Income statement for April
	Standard		Deluxe		Total
	Amount	%	Amount	%	Amount	%
Sales revenue	$254,200	100.0%	$161,700	100.0%	$415,900	100.0%
Variable expenses:
Production costs	$65,600	25.8%	$65,100	40.3%	$130,700	31.4%
Sales commissions	$40,672	16.0%	$25,872	16.0%	$66,544	16.0%
Total variable costs	$106,272	41.8%	$90,972	56.3%	$197,244	47.4%
Contribution margin	$147,928	58.2%	$70,728	43.7%	$218,656	52.6%
Fixed expenses:
Advertising					$106,000
Depreciation					$22,000
Administrative					$63,500
Total fixed costs					$191,500
Net operating income					$27,156
Contribution margin format income statement for May
Carbex Inc
Income statement for May
	Standard		Deluxe		Total
	Amount	%	Amount	%	Amount	%
Sales revenue	$68,200	100.0%	$392,700	100.0%	$460,900	100.0%
Variable expenses:
Production costs	$17,600	25.8%	$158,100	40.3%	$175,700	38.1%
Sales commissions	$10,912	16.0%	$62,832	16.0%	$73,744	16.0%
Total variable costs	$28,512	41.8%	$220,932	56.3%	$249,444	54.1%
Contribution margin	$39,688	58.2%	$171,768	43.7%	$211,456	45.9%
Fixed expenses:
Advertising					$106,000
Depreciation					$22,000
Administrative					$63,500
Total fixed costs					$191,500
Net operating income					$19,956
Break-even point in dollar sales for April	Total fixed costs/Contribution margin ratio
Break-even point in dollar sales for April	191500/52.6%
Break-even point in dollar sales for April	$364,068
The break-even point in May would be higher than in April as contribution margin of May is lower