Multi Frame Company has the following revenue and cost budgets for the two products it sells:The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, Multi Frame rounds to the nearest cent and unit.The total number of units needed to break even if the budgeted direct labor costs were $2 for plastic frames instead of $3 is
Answer(s): B
If the labor costs for the plastic frames are reduced by $1 1the composite unit contribution margin will be $27 [($10--$2--$3) + (3)($15--$3--$5)]. Hence1 the new breakeven point is 144,444 units [4 units x ($975 .000 FO + $27)].
Multi Frame Company has the following revenue and cost budgets for the two products it sells:The budgeted unit sales equal the current unit demand, and total fixed overhead for the year is budgeted at $975,000. Assume that the company plans to maintain the same proportional mix. In numerical calculations, Multi Frame rounds to the nearest cent and unit.The total number of units needed to break even if sales were budgeted at 150,000 units of plastic frames and 300,000 units of glass frames with all other costs remaining constant is
Answer(s): C
The unit contribution margins for plastic frames and glass frames are $5 ($10 --$2-- $3) and $7 ($15 -- $3 -- $5), respectively. If the number of plastic frames sold is 50% of the number of glass frames sold, a composite unit will contain one plastic frame and two glass frames. Thus, the composite unit contribution margin will be $19 ($5 + $7 + $7), and the breakeven point in units will be 153,947 [3 units x ($975,000 + $19)]. Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented in the next column.
The breakeven point (rounded to the nearest dollar) for Barnes Corporation for the current year is
Fixed costs total $350,000. Variable costs total $675,000. Given sales of $1 1500,000, the contribution margin is $825,000 ($1 ,500,000 -- $675,000). Thus, the contribution margin percentage is 55% ($825,000 ÷ $1,500,000). Dividing the $350,000 of fixed costs by 55% produces a breakeven point of $636363.64.
Barnes Corporation manufactures skateboards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented in the next column.For the coming year1 the management of Barnes Corporation anticipates a 10% increase in sales, a 12% increase in variable costs, and a $45,000 increase in fixed expenses. The breakeven point for next year will be
Answer(s): A
Sales are expected to be $1,650,000 ($1,500,000 x 1.10), variable costs $756,000 ($675,000 x 1.12), and fixed expenses $395,000 ($350,000 + $45,000). Thus, the contribution margin will be $894000 ($1,650,000 --$756,000), and the contribution margin percentage is 54.1818%. The breakeven point is therefore $729,027 ($39500 fixed expenses ÷ 54.1818%).
Kim is thinking of organizing a funraiser to support a local charity. She has planned to rent a banquet hall and provide the guests with food, entertainment , and various party favors. She has decided to charge $500 a person. After researching around town, Kim has discovered the following costs:What is Kim's contribution margin?
The contribution margin in a breakeven analysis can be found by taking the revenues per person and subtracting the variable cost per person. In this case, it would be $500-- $20 = $480.
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