# Week 3 worksheet ch

Pages: 3 (328 words) Published: March 7, 2015
﻿Northenscold Company sells several products. Information of average revenue and costs are as follows:

Selling price per unit\$20.00
Variable costs per unit:
Direct materials\$4.00
Direct manufacturing labor\$1.60
Selling costs\$2.00
Annual fixed costs \$96,000

1. Calculate the contribution margin per unit.

CM= \$20 - \$4 - \$1.60 - \$0.40 - \$2 = \$12

Contribution Margin Ratio = CM/Selling Price =12/20=0.6

Thus, the breakeven point in total sales dollars is:
Fixed Costs = 96000/0.6 = \$160,000 Contribution Margin Ratio

2. Calculate the number of units Northenscold’s must sell each year to break even.

FC/CM 96000/12 =8000units

3. Calculate the number of units Northenscold’s must sell to yield a profit of \$144,000.

(FC+ Profits)/CM = 96000+144000/12 = 20000 units

2. Berhannan’s Cellular sells phones for \$100. The unit variable cost per phone is \$50 plus a selling commission of 10%. Fixed manufacturing costs total \$1,250 per month, while fixed selling and administrative costs total \$2,500. A. What is the contribution margin per phone?

CM per phone = \$100 - \$60 = \$40
B. What is the breakeven point in phones?

Breakeven in phones FC/CM = 3750/40

Breakeven Point = 94 phones

c. How many phones must be sold to earn a targeted profit of \$7,500? (FC+ Profits)/CM = (3750+7500)/40 = 281.25 phones
To achieve target profit: Must sell 282 phones

RSE Corporation sells its product for \$10 per unit. Its variable cost is \$3 per unit, and total fixed costs are \$700. Assuming next period’s estimated sales are 250 units and that 250 units is within the relevant range, calculate the following amounts: a.Degree of operating leverage

b.Margin of safety in units
c.Margin of safety in revenues
d.Estimated income or loss (indicate which)
a....

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