Question

11. 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? son Requirement 1. Fill in the blanks for each company (Round the contribution margin per unit and ratio calculations to two decimal places.) Q R S T Target sales.....................$ 687,500 $ 480,000 $ 146,250 Variable expenses............. 192.500 L 198,000 165,000 82,000 Fixed expenses................. S 90.000 133,000 Operating income (loss)........ Units sold.......... 110,000 13,000 16,500 Contribution margin per unit .... S 6 .60 $ 9.00 $ 38.00 Contribution margin ratio ....... 0.55 S Requirement 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? Begin by determining the formula, then compute the break even sales for each company one at a time. (Complete all answer boxes. For amounts with a So balance, make sure to enter "0" in the appropriate cell.) (1) + (2) (3) - Breakeven sales + + R. (D s TD + Which company has the lowest breakeven point in sales dollars? What causes the low breakeven point? (4) - - has the lowest breakeven point primarily due to (5) - 1: Data Table

Answer 1

Four Companies Requirement 1 Requirement 2 Breakeven sales in dollars = Fixed cost / Contribution Margin Ratio S 146250 29250 82000 Target Sales Variable Expenses Fixed Expenses Operating Income(loss) Units sold Contribution margin per unit Contribution margin ratio Q 687500 192500 405000 90000 75000 6.6 72% R 480000 216000 165000 99000 110000 T 825000 198000 494000 133000 16500 38 76% Company Q = 405000 / 72% = 562500 Company R = 165000 / 55% = 300000 Company S = 82000 / 80% = 102500 Company T = 494000 / 76% = 650000 13000 2.4 55% 80% Company Q Fixed Expenses Q = 687500 - 192500 - 90000 = 40500 Unist Sold Q = ( 687500 - 192500) / 6.6 = 75000 Contribution margin ratio = ( 687500 - 192500 ) / 687500 = 72% Company R Contribution margin per unit = ( 480000 X 55%) / 110000 = 2.4 Contribution margin = 480000 X (1-0.55 ) = 216000 Operating Income(loss) = 480000 - 216000 - 165000 = 99000 Company s Contribution margin = 13000 X 9 = 117000 Contribution margin ratio = 117000 / 146250 = 80% Variable Expenses = 146250 X (1-0.80 ) = 29250 Operating Income(loss) = 146250 - 29250 - 82000 = 35000 Company T Contribution margin = 16500 X 38 = 627000 Target Sales = 198000 + 627000 = 825000 Fixed Expenses = 825000 - 198000 - 133000 = 494000 Contribution margin ratio = 627000 / 825000 = 76%