This is problem 3-23A in Performance Measurement & Accounting Systems 7th editio

Question

This is problem 3-23A in Performance Measurement & Accounting Systems 7th edition-Managerial Accounting

Rosenthal Company makes and sells products with variable costs of $24 each. Rosenthal incurs annual fixed costs of $315,000. The current sales price is $87.

Required:

The following requirements are interdependent. For example, the $252,000 desired profit introduced in Requirement c also applies to subsequent requirements. Likewise, the $80 sales price introduced in Requirement d applies to the subsequent requirements.

c-2.

Prepare an income statement using the contribution margin format.

d-1.

If the sales price drops to $80 per unit, what level of sales is required to earn the desired profit? Express your answer in units and dollars.

d-2

Prepare an income statement using the contribution margin format.

e-1.

If fixed costs drop to $280,000, what level of sales is required to earn the desired profit? Express your answer in units and dollars.

Rosenthal Company makes and sells products with variable costs of $24 each. Rosenthal incurs annual fixed costs of $315,000. The current sales price is $87.

Explanation / Answer

c2) Desired Profit               252,000.00 Fixed Costs               315,000.00 Total Contribution Desired               567,000.00 Contribution per unit                          63.00 No of units                    9,000.00 Statement showing computations Particulars Amount Sales Price per unit                          87.00 Variable Costs per unit                          24.00 Contribution per unit                          63.00 No of units                    9,000.00 Total cont               567,000.00 Fixed Costs               315,000.00 Income               252,000.00 d1) Desired Profit               252,000.00 Fixed Costs               315,000.00 Total Contribution Desired               567,000.00 Contribution per unit                          56.00 No of units to be sold                  10,125.00 Sales = 10125*80               810,000.00 d2) Statement showing computations Particulars Amount Sales Price per unit                          80.00 Variable Costs per unit                          24.00 Contribution per unit                          56.00 No of units                  10,125.00 Total cont               567,000.00 Fixed Costs               315,000.00 Income               252,000.00 Sales = 10125*80               810,000.00 e) Desired Profit               252,000.00 Fixed Costs               280,000.00 Total Contribution Desired               532,000.00 Contribution per unit                          56.00 No of units to be sold                    9,500.00 Sales = 9500*80               760,000.00

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