Question

Required information [The following information applies to the questions displayed below.) Endless Mountain Company manufactures a single product that is popular with outdoor recreation enthusiasts. The company sells its product to retailers throughout the northeastern quadrant of the United States. It is in the process of creating a master budget for 2017 and reports a balance sheet at December 31, 2016 as follows: $ 46,200 260,000 11,250 32,250 $349,700 Endless Mountain Company Balance Sheet December 31, 2016 Assets Current assets: Cash Accounts receivable (net) Raw materials inventory (4,500 yards) Finished goods inventory (1,500 units) Total current assets Plant and equipment: Buildings and equipment Accumulated depreciation Plant and equipment, net Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Stockholders' equity: Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 900,000 (292,000) 608,000 $957,700 $158,000 $ 419,800 379,900 799,700 $957,700

Please solve for required in image 1-2.

Answer 1

a. Total Fixed Costs per year = $150000*4+(25000+64000+12000+8000+8000)*4 = $1068000

b. Total Variable Cost per unit = $3*3.5+18*0.25+3*0.25+1.25 = $17

c. Contribution margin per unit = Selling Price - Variable Cost per unit
= $32 - $17 = $15 per unit

d. Unit sales to breakeven = Fixed Costs / Contribution Margin per unit
= $1068000 / $15 = 71200 units

Dollar sales to breakeven = 71200 x $32 = $2278400

e.
Margin of Safety = (Current Sales - Break even Sales) / Current Sales x 100
= ($2848000-2278400) / 2848000 = 20%
in Dollars = $2848000 - 2278400 = $569600

f.

Contribution margin	$    1,335,000
Fixed Costs	$    1,068,000
Net Operating Income	$       267,000

Degree of Operating Leverage = Contribution Margin / Net Operating Income
= $1335000 / 267000 = 5 times

Units to be sold =12000+37000+15000+25000 = 89000

Variable Costing Income Statement
Sales Revenue		$       2,848,000	=89000*32
Variable Expenses :
Direct material	$       934,500		=89000*3.5*3
Direct labor	$       400,500		=89000*0.25*18
Manufacturing Overhead	$          66,750		=89000*0.25*3
Selling and administrative expense	$       111,250		=89000*1.25
Total variable Expenses		$       1,513,000
Contribution Margin		$       1,335,000
Fixed Expenses
Manufacturing Overhead	$       600,000
Selling and administrative expense	$       468,000		=25000+64000+12000+8000+8000
Total Fixed Expenses		$ 1,068,000
Net Operating Income		$ 267,000