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4-27 and 4-28
CONCEPTUAL CONNECTION How could Pelley increase projected operating income without increasing the total sales revenue? Income Statement, Break-Even Units, Units to Earn Target Income mpany sold 26,800 units last year at $16.00 each. Variable cost was $11.50, and total 4-27 Exercise Melford Co fixed cost was $126,000. OBJECTIV Required: 1. Prepare an income statement for Melford for last year. 2. Calculate the break-even point in units. 3. Calculate the units that Melford must sell to earn ope rating income of $12,150 this year. Exercise 4-28 Units Sold to Break Even, Unit Variable Cost, Unit Manufacturing Cost, Units to Earn Target Income Werner Company produces and selis The variable cost per pan is as follow OBJECTIVE le foil baking pans to retailers for $2.75 per pan. Direct materials Direct labor Variable factory overhead Variable selling expense $0.37 0.63 0.53 0.12 Fixed manufacturing cost totals $111,425 per year. Administrative cost (all fixed) totals $48,350. Required l. Compute the number of pans that must be sold for Werner to break even. CONCEPTUAL CONNECTION What is the unit variable cost? What is the unit variable manufacturing cost? Which is used in cost-volume-profit analysis and why? How many pans must be sold for Werner to earn operating income of $13,530? how much sales revenue must Werner have to earn operating income of $13,530?
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Both are individual questions. Although both have been answered:) Solution: Ex-4-27: 1) Income Statement Particulars Sales Revenue (26800*16) Less: Variable cost (26800 11.50 Contribution Margin Less: fixed Cost Net Operating income/-Loss Total S 16.00 428800 $ 11.50 308200 $ 4.50 120600 126000 5400 Unit 2) Break even point in units Fixed cost/ Contribution margin per unit (126000/4.50)- 28000 units 3) Total Requirement (126000+12150) Contribution Margin per unit Target Sale units 138150 4.5 30700

EX-4-28: 1) Break even point in units Fixed cost/Contribution margin per unit (111425)/(2.75-0.37-0.63-0.53-0.12) 101295 units 2) Unit variable cost (0.37+0.63+0.53+0.12) $ 1.65 Unit variable Manuf cost (0.37+0.63+0.53) $ 1.53 Variable cost Cost is used in CVP ananlysis. Because it is controllable cost of unit. 124955 1.1 113595 3) Total Requirement (111425+13530) Contribution Margin per unit Target Sale units 124955 40% 312388 4) Total Requirement (111425+13530) Contribution Margin Ratio (1.1/2.75) Target Sale Dollar

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