Homework Answers
21. (b) $50,000
Explanation : Variable costs (80% of revenue) = $400,000
Contribution Margin (20% of revenue) = ($400,000 / 80%) * 20%
= $100,000
Contribution Margin = Fixed Costs + Target Profit
$100,000 = Fixed Costs + $50,000
Fixed Costs = $50,000
22. (c) Variable Costs
Explanation : Contribution Margin is referred to as Sales Revenue reduced by the variable costs.
23. (d) $2.00
Explanation : Maintenance Cost for 200 Labor Hours = $1,000
Maintenance Cost for 1000 Labor Hours = $2,600
Using High Low method
Maintenance Cost per Labor Hour = Difference in Costs / Difference in Labor Hours
= ($2,600 - $1,000) / (1000 hours - 800 hours)
= $2.00 per labor hour
24. (d) $2,467,105
Explanation : Margin of Safety = 24%
Fixed Cost= $750,000
Contribution Margin = Fixed Cost / (1 - Margin of Safety)
= $750,000 / (1 - 0.24)
= $986,842
Total Sales Revenue = Contribution Margin in $ / Contribution Margin in %
= $986,842 / 40%
= $2,467,105
25. (b) Margin of Safety
Explanation : The Margin of safety is the percentage of total revenue that is responsible for generating operating profits. As the margin of safety increases, the operating profits increases and vice-a-versa.
26. (b) Greater than its total (fixed + variable) costs
Explanation :
Contribution Margin 
Fixed Costs (given)
Add Variable Cost to Both Sides
Variable cost + contribution margin
Variable cost + Fixed cost
Total Revenue
Total Cost
Add Answer to:
21. Variable costs are $400,000 and the contribution margin (CM) ratio is 0.20 (20%). If target...
21. Variable costs are $400,000 and the contribution margin (CM) ratio is 0.20 (20%). If target...
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Calculate: 1)Contribution margin (CM)ratio and variable expense ratio. 2)Break-even point (BEP)...
Calculate:
1)Contribution margin (CM)ratio and variable expense ratio.
2)Break-even point (BEP) in UNIT SALES and RM ( ) using equation
method.
3)If sales increase by RM60,000 for the next month and there is no
change in the cost behavior patterns, how much will the company’s
net operating increase by using the Contribution Margin
(RM)Ratio.
4)Based on the original data, if the company wants to earns a
minimum profit of RM300,000, HOW many units will have to be sold to
meet...
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21. Variable costs are $400,000 and the contribution margin (CM) ratio is 0.20 (20%). If target profit (net income) is $50,000, how much are fixed costs? a $75,000 b. $50,000 c. $350,000 d. $2,000,000 22. Contribution margin is the amount of sales revenue remaining after deducting a. mixed costs. b. fixed costs c. variable costs. d. factory overhead costs. 23. At Harry's Company, maintenance costs are a mixed cost. At the low level of activity (200 direct labor hours), maintenance...
Calculate:
1)Contribution margin (CM)ratio and variable expense ratio.
2)Break-even point (BEP) in UNIT SALES and RM ( ) using equation
method.
3)If sales increase by RM60,000 for the next month and there is no
change in the cost behavior patterns, how much will the company’s
net operating increase by using the Contribution Margin
(RM)Ratio.
4)Based on the original data, if the company wants to earns a
minimum profit of RM300,000, HOW many units will have to be sold to
meet...
Problem 21-1A Contribution margin income statement and contribution margin ratio LO A1 The following costs result from the production and sale of 4,000 drum sets manufactured by Tight Drums Company for the year ended December 31, 2017. The drum sets sell for $250 each. The company has a 25% income tax rate. $ 68,000 328,000 104,000 60,000 Variable production costs Plastic for casing Wages of assembly workers Drum stands Variable selling costs Sales commissions Fixed manufacturing costs Taxes on factory...
Calculator Sales Revenue Approach, Variable Cost Ratio, Contribution Margin Ratio Paragon Company's controller prepared the following budgeted income statement for the coming year: Sales $490,000 Total variable cost 302,950 Contribution margin $187,050 64,800 Total fixed cost Operating income 122,250 Required: If required, round ratios to the nearest whole percent. Use rounded amounts in subsequent requirements. Round dollar amounts to the nearest dollar. 1. What is Paragon's variable cost ratio? What is its contribution margin ratio? Variable cost ratio Contribution margin...
Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Company plans to sell 14,000 T-shirts at $18 each in the coming year. Product costs include: $6.30 $1.26 Direct materials per T-shirt Direct labor per T-shirt Variable overhead per T-shirt Total fixed factory overhead $0.54 $43,000 Variable selling expense is the redemption of a coupon, which averages $0.90 per T-shirt; fixed selling and administrative expenses total $18,000. Required: 1. Calculate the following values: Round dollar amounts to the nearest cent and round...
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