Managerial Accounting 1B
Financial and Managerial Accounting
Chapter 18
1.
Exercise 185 Predicting sales and variable costs using contribution margin L.O. C2
Orlando Company management predicts that it will incur fixed costs of $250,000 and earn pretax income of $350,000 in the next period. Its expected contribution margin ratio is 60%. 
Required: 
Compute the amount of total dollar sales. (Omit the “$” sign in your response.)
Total dollar sales 
2. 
Compute the amount of total variable costs. (Omit the “$” sign in your response.) 
Total variable costs 
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2.
Exercise 1810 Contribution margin, breakeven, and CVP chart L.O. P2
Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $630,000. 
(a) 
Compute the company’s contribution margin. (Omit the “$” sign in your response.) 
Contribution margin 
(b) 
Compute the company’s contribution margin ratio. (Omit the “%” sign in your response.) 
Contribution margin ratio 
(c) 
Compute the company’s breakeven point in units. 
point
Breakeven 
(d) 
Compute the company’s breakeven point in dollars of sales. (Omit the “$” sign in your response.) 
Breakeven point 
3.
Exercise 1812 Income reporting and breakeven analysis L.O. C2
Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company’s annual fixed costs are $630,000.
(1) 
Prepare a contribution margin income statement for Apollo Company at the breakeven point. (Leave no cells blank – be certain to enter “0” wherever required. Input all amounts as positive values. Omit the “$” sign in your response.) 
(2) 
Assume if the company’s fixed costs increase by $135,000, what amount of sales (in dollars) is needed to break even point? (Omit the “$” sign in your response. ) 
Breakeven
4.
Exercise 1813 Computing sales to achieve target income L.O. C2
Apollo Company manufactures a single product that sells for $168 per unit and whose total variable costs are $126 per unit. The company targets an annual aftertax income of $840,000. The company is subject to a 20% income tax rate. Assume that fixed costs remain at $630,000. 
(1)
Compute the unit sales to earn the target aftertax net income. 
Unit sales 
(2)
Compute the dollar sales to earn the target aftertax net income. (Omit the “$” sign in your response.) 
Dollar sales 
5.
Exercise 1815 Predicting unit and dollar sales L.O. C2
Greenspan Company management predicts $500,000 of variable costs, $800,000 of fixed costs, and a pretax income of $100,000 in the next period. Management also predicts that the contribution margin per unit will be $60. 
(1)
Compute the total expected dollar sales for next period. (Omit the “$” sign in your response.) 
Total expected dollar sales 
(2)
Compute the number of units expected to be sold next period. 
Expected unit sales 
6.
Exercise 1817 CVP analysis using composite units L.O. P4
Home Builders sells windows and doors in the ratio of 8:2 (windows:doors). The selling price of each window is $100 and of each door is $250. The variable cost of a window is $62.50 and of a door is $175. Fixed costs are $450,000. 
(1)
Determine the selling price per composite unit. (Omit the “$” sign in your response.) 
Selling price per composite unit 
(2)
Determine the variable costs per composite unit. (Omit the “$” sign in your response.) 
Variable costs per composite unit 
(3) 
Determine the breakeven point in composite units. 
Breakeven point
composite units 
(4) 
Determine the number of units of each product that will be sold at the breakeven point. 
Unit sales of windows at breakeven point 
Unit sales of doors at breakeven point 
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Problem 181A Contribution margin income statement and contribution margin ratio L.O. A1
The following costs result from the production and sale of 4,000 drum sets manufactured by Vince Drum Company for the year ended December 31, 2011. The drum sets sell for $250 each. The company has a 25% income tax rate. 
20,000
Variable production costs 

Plastic for casing 
$ 
68,000 
Wages of assembly workers 
328,000 

Drum stands 
104,000 

Variable selling costs 

Sales commissions 
60,000 

Fixed manufacturing costs 

Taxes on factory 
10,000 

Factory maintenance 
20,000 

Factory machinery depreciation 
80,000 

Fixed selling and administrative costs 

Lease of equipment for sales staff 

Accounting staff salaries 
70,000 

Administrative management salaries 
150,000 
Required:
1.
Prepare a contribution margin income statement for the company. (Input all amounts as positive values. Omit the “$” sign in your response.) 
2.1 
Compute its contribution margin per unit. (Input all amounts as positive values. Omit the “$” sign in your response.) 
2.2 
Compute its contribution margin ratio. (Omit the “%” sign in your response.) 
Contribution margin ratio 8.
Problem 187A Breakeven analysis with composite units L.O. P4
National Co. manufactures and sells three products: red, white, and blue. Their unit sales prices are red, $55; white, $85; and blue, $110. The per unit variable costs to manufacture and sell these products are red, $40; white, $60; and blue, $80. Their sales mix is reflected in a ratio of 5:4:2 (red:white:blue). Annual fixed costs shared by all three products are $150,000. One type of raw material has been used to manufacture all three products. The company has developed a new material of equal quality for less cost. The new material would reduce variable costs per unit as follows: red, by $10; white, by $20; and blue, by $10. However, the new material requires new equipment, which will increase annual fixed costs by $20,000. 
Required: 1.
to calculate
Sales Dollars
. Omit the “$” sign in your response.)
Assume if the company continues to use the old material, determine its breakeven point in both sales units and sales dollars of each individual product. (Always round your composite units up (ceiling rounding) to next whole unit. Then use the 
Sales Units 
Sales Units
BreakEven Points 
Sales Dollars  
Red at breakeven 

White at breakeven 

Blue at breakeven 
2.
Assume if the company uses the new material, determine its new breakeven point in both sales units and sales dollars of each individual product. (Always round your composite units up (ceiling rounding) to next whole unit. Then use the Sales Units to calculate Sales Dollars. Omit the “$” sign in your response.) 
BreakEven Points Sales Units Sales Dollars Red at breakeven White at breakeven Blue at breakeven