calculations and explainations

Question A Income Statement at Five Units Sold

Contribution Margin 6 .70 x 5 ) 33 .50

Fixed Costs

Fixed Manufacturing Overheads 5

Fixed Selling Expense 30

Fixed Administration Expense 15

Net Loss (16 .50 Question B Income Statement at Present System

Sales (26 ,000 x 25 ) 650 ,000

Variable Costs (26 ,000 x 18 .75 ) 487 ,500

Contribution Margin 162 ,500

Fixed Costs 125 ,000

Net Profit 37 ,500 3 . The profit statements and the break even points of the case analyzed above may

at first glance show contradictory results . The reason for such figures stems from the fact that the new production method diminished the variable costs , but at the same time increased the fixed costs . In this respect , the contribution per unit increased from 6 .25 to 9 , while the fixed costs rose by 50 ,000 . Under the new proposed production methods , at high volume of sales , the firm will incur greater profit margins because the contribution margin will be greater and the fixed cost coverage shall be higher . Indeed at 26 ,000 sales , the firm will attain a higher profit of 15 ,000 under the new system . However since the fixed costs increased substantially , the break even point will decrease because at low sales volume the organization will more quickly turn out to losses due to such high fixed expenditure . At the new production scheme a contribution margin of 175 ,000 is now required which is far greater than the 125 ,000 previously held

Question C

Contribution per ticket 80 - 1 79 per ticket In to determine the point at which the firm will neither make a profit nor a loss the above equation will be used . Since Jepson is paid a salary , this is considered as the fixed cost , while the contribution margin comprises the difference between the ticket selling price and variable expenditure , which in such a stance solely consists of the printing costs . Therefore the team is required to sell 151 ,899 tickets to break even considering only Jepson 's Salary Cost The break even point when considering all fixed expenditure will substantially increase the number of tickets to be sold as portrayed by the calculation above

Question D

Details Direct Materials Direct

Labor Manufacturing

Overheads Period

Costs

Oak Wood 50 ,000 Misc . supplies

10 ,000

Furniture parts 5 ,500 Payroll

Manager 's salary

Admin . salary

Production line employees 45 ,500

25 ,000 100 ,000

Building depreciation

21 ,000 7 ,000

Plant equip . maintenance 5 ,000

Utilities 16 ,000

Income Taxes 85 ,000

Question E

Dell Company Manufacturing Account

Opening Stock of Raw Materials 25 ,000

Purchases of Raw Materials 110 ,000

Closing Stock of Raw Materials (40 ,000

Costs of Raw Materials Consumed 95 ,000

Direct Labor 95 ,000

Cost of goods manufactured 190 ,000

Manufacturing Overheads 300 ,000

490 ,000

Opening Stock of Work-in-progress 150 ,000

Closing Stock of Work-in-progress (180 ,000

Cost of Goods Sold Computation

Opening Stock of Finished Goods 741 ,000 Closing Stock of Finished Goods (86 ,000...