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    Polytechnic State University Sanluis
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Category > Accounting Posted 01 May 2017 My Price 8.00

CONTRIBUTION MARGIN, BREAK-EVEN SALES

 

Problem 15-53 CONTRIBUTION MARGIN, BREAK-EVEN SALES, MARGIN  OF SAFETY

Suppose that Kicker had the following sales and cost experience (in thousands of dollars) for May of the current year and for May of the prior year:

 

 

May, Current Year

May, Prior Year

Total sales

$ 43,560

$ 41,700

Less:

 

 

Purchase price paid

(17,000)

(16,000)

Additional labor and supplies

(1,400)

(1,200)

Commissions

     (1,250)

     (1,100)

Contribution margin

$ 23,910

$ 23,400

Less:

 

 

Fixed warehouse cost

(680)

(500)

Fixed administrative cost

(4,300)

(4,300)

Fixed selling cost

(5,600)

(5,000)

Research and development

     (9,750)

     (4,000)

Operating income

$   3,580

$   9,600

In August of the prior year, Kicker started an intensive quality program designed to enable it to build original equipment manufacture (OEM) speaker systems for a major automobile company. The program was housed in research and development. In the be- ginning of the current year, Kicker’s accounting department  exercised tighter  control  over sales commissions, ensuring that no dubious (e.g., double) payments were made.      The increased sales in the current year required additional warehouse space that Kicker rented  in town.

 

Required:

1.     Calculate the contribution margin ratio for May of both years.

2.     Calculate the break-even point in sales dollars for both years.

3.     Calculate the margin of safety in sales dollars for both years.

4.     Analyze the differences shown by your calculations in Requirements 1, 2, and 3.

 

 

 

 
 

Answers

Alpha Geek
(8)
Status NEW Posted 01 May 2017 08:05 AM My Price 8.00

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