Question

P7-61A (similar to) Question Help The budgets of four companies yield the following information: (Click the icon to view the budget information for the four companies.) Requirements 1. Fill in the blanks for each company. 2. Compute breakeven, in sales dollars, for each company. Which company has the lowest breakeven point in sales dollars? What causes the low breakeven point? Requirement 1. Fill in the blanks for each company. (Round the contribution margin per unit and ratio calculations to two decimal places.) 0 Data Table Target sales...... Variable expenses..... 800,000 232,000 Fixed expenses.............. 213,000 Operating income (loss) ........ T Units sold.................. . - Target sales................. $ 6.40 Contribution margin per unit .... $ Contribution margin ratio ........ Company Q R S 800,000 $ 480,000 $ 236,000 232,000 165,000 94,000 213,000 $ $ Variable expenses .......... 270,000 133,000 Fixed expenses............ $ Operating income (loss)...... Units sold Contribution margin per unit .. $ 110,000 $ $ 12,500 9.44 $ 18,000 35.00 6.40 Contribution margin ratio .. 0.55 Print [ Done Print Done

Answer 1

REQUIREMENT: 1

	Q	R	S	T
TARGETED SALES	800,000	480,000	236,000	900,000
VARIABLE EXPENSES	232,000	216,000	118,000	270,000
FIXED EXPENSES	355,000	165,000	94,000	497,000
OPERATING INCOME(LOSS)	213,000	99,000	24,000	133,000
UNIT SOLD	88,750	110,000	12,500	18,000
CONTRIBUTION MARGIN PER UNIT	6.40	2.40	9.44	35.00
CONTRIBUTION MARGIN RATIO	0.71	0.55	0.50	0.70

Q

OPERATING INCOME= SALES-VARIABLE-FIXED EXPENSES

213,000 = 800,000-232,000-FIXED EXPNSES

FIXED EXPENSES= 800,000-232,000-213,000

=355,000

CONTRIBUTION= SALES - VARIABLE EXP

=800,000-232,000

=568,000

UNIT SOLD = CONTRIBUTION/CM PER UNIT

=568,000/6.40

=88,750 UNITS

CONTRIBUTION MARGIN RATIO= CONTRIBUTION/SALES

=568,000/800,000

= 0.71

R

CONTRIBUTION = SALES*CM RATIO

=480,000*0.55

=264,000

CONTRIBUTION =,SALES- VARIABLE EXP

264,000=480,000 - VARIABLE EXP

VARIABLE EXP= 216,000

CONTRIBUTION MARGIN PER UNIT= CONTRIBUTION /UNIT SOLD

=264,000/110,000

=2.4 PER UNIT

S:

CONTRIBUTION = UNIT SOLD* CONTRIBUTION MARGIN PER UNIT

9.44*12,500

=118,000

CONTRIBUTION= SALES- VARIABLE

118,000= 236,000-VARIABLE

VARIABLE EXP=118,000

CM RATIO = CONTRIBUTION/SALES

=118,000/236,000

=0.50

T.

CONTRIBUTION = UNITS SOLD*CM PER UNIT

=18,000*35

=630,000

CONTRIBUTION= SALES- VARIABLE EXPENSES

630,000 = SALES - 270,000

SALES= 900,000

CONTRIBUTION MARGIN RATIO= CONTRIBUTION/SALES

= 630,000/900,000

=0.70

REQUIREMENT 2:

BREAKEVEN POINT= FIXED COST/CM RATIO

Q =355,000/0.71

=500,000

R =165,000/0.55

=300,000

S =94,000/0.50

=188,000

T =497,000/0.70

=710,000

COMPANY S HAS LOWEST BREAK EVEN POINT BECAUSE IT HAS LOWEST FIXED COST IN ALL COMPANIES.