Required
a. Prepare a contribution income statement for June.
b. Determine NYT’s monthly break-even point in units.
c. Determine NYT’s margin of safety for June 2017.
d. Determine the unit sales required for a monthly after-tax profit of $15,000.
e. Prepare a cost-volume-profit graph. Label the horizontal axis in units with a maximum value of
4,000. Label the vertical in dollars with a maximum value of $300,000. Draw a vertical line on
the graph for the current (3,000) unit level and label total variable costs, total fixed costs, and total
before-tax profits at 3,000 units.
Homework Answers
Answer
- All working forms part of the answer
- As per guidelines, we have to answer first four parts only when a question has subparts. However, I tried the last part also.
- Answer (a)
|
Service Revenues |
[3000 x $85] |
$255,000 |
|
(-) Variable cost |
[3000 x $65] |
$195,000 |
|
Contribution margin |
[3000 x $(85-65)] |
$60,000 |
|
(-) Total Fixed cost |
$40,000 |
|
|
Net Income |
$20,000 |
- Answer (b)
|
A |
Total Contribution margin |
$60000 |
|
B |
Total Units |
3000 |
|
C=A/B |
Unit Contribution margin |
$20 |
|
D |
Total Fixed cost |
$40000 |
|
E=D/C |
Break Even point in Units |
2000 |
- Answer (c)
|
A |
Break Even point in Units |
2000 |
|
B |
Total tour |
3000 |
|
C=B-A |
Margin of Safety in Units |
1000 |
|
D |
Price per unit |
$85 |
|
E=C x D |
Margin of Safety in $ |
$85,000 |
- Answer (d)
|
A |
Target profits |
$15000 |
|
B |
Total Fixed cost |
$40000 |
|
C=A+B |
Total contribution margin required for target profits |
$55,000 |
|
D |
Unit Contribution margin |
$20 |
|
E=C/D |
Units sale required for target profit |
2750 |
- Answer (e)
Add Answer to:
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