Belmain Co. expects to maintain the same inventories at the end of 2014 as at th
ID: 2467165 • Letter: B
Question
Belmain Co. expects to maintain the same inventories at the end of 2014 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during 2014. A summary report of these estimates is as follows:
It is expected that 12,000 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 18,000 units.
Explanation / Answer
Calculation profit for 12,000 units and 18,000 units:
Details
At 12,000 units
At 18,000 units
Per unit
Total
Per unit
Total
Selling price
$ 240.00
$ 2,880,000.00
$ 240.00
$ 4,320,000.00
Less: variable cost:
Direct material
$ 50.00
$ 600,000.00
$ 50.00
$ 900,000.00
Direct labor
$ 30.00
$ 360,000.00
$ 30.00
$ 540,000.00
Factory overhead
$ 6.00
$ 72,000.00
$ 6.00
$ 108,000.00
Sales salaries and commissions
$ 4.00
$ 48,000.00
$ 4.00
$ 72,000.00
Miscellaneous selling exp
$ 1.00
$ 12,000.00
$ 1.00
$ 18,000.00
Supplies
$ 4.00
$ 48,000.00
$ 4.00
$ 72,000.00
Miscellaneous administrative exp
$ 1.00
$ 12,000.00
$ 1.00
$ 18,000.00
Total variable cost
$ 96.00
$ 1,152,000.00
$ 96.00
$ 1,728,000.00
Contribution
$ 144.00
$ 1,728,000.00
$ 144.00
$ 2,592,000.00
Fixed cost:
Factory overhead
$ 29.17
$ 350,000.00
$ 19.44
$ 350,000.00
Sales salaries and commissions
$ 28.33
$ 340,000.00
$ 18.89
$ 340,000.00
Advertising
$ 9.67
$ 116,000.00
$ 6.44
$ 116,000.00
Travel
$ 0.33
$ 4,000.00
$ 0.22
$ 4,000.00
Miscellaneous selling exp
$ 0.19
$ 2,300.00
$ 0.13
$ 2,300.00
Office and officers salaries
$ 27.08
$ 325,000.00
$ 18.06
$ 325,000.00
Supplies
$ 0.50
$ 6,000.00
$ 0.33
$ 6,000.00
Miscellaneous administrative exp
$ 0.73
$ 8,700.00
$ 0.48
$ 8,700.00
Total fixed cost
$ 96.00
$ 1,152,000.00
$ 64.00
$ 1,152,000.00
Profit
$ 48.00
$ 576,000.00
$ 80.00
$ 1,440,000.00
Details
At 12,000 units
At 18,000 units
Per unit
Total
Per unit
Total
Selling price
$ 240.00
$ 2,880,000.00
$ 240.00
$ 4,320,000.00
Less: variable cost:
Direct material
$ 50.00
$ 600,000.00
$ 50.00
$ 900,000.00
Direct labor
$ 30.00
$ 360,000.00
$ 30.00
$ 540,000.00
Factory overhead
$ 6.00
$ 72,000.00
$ 6.00
$ 108,000.00
Sales salaries and commissions
$ 4.00
$ 48,000.00
$ 4.00
$ 72,000.00
Miscellaneous selling exp
$ 1.00
$ 12,000.00
$ 1.00
$ 18,000.00
Supplies
$ 4.00
$ 48,000.00
$ 4.00
$ 72,000.00
Miscellaneous administrative exp
$ 1.00
$ 12,000.00
$ 1.00
$ 18,000.00
Total variable cost
$ 96.00
$ 1,152,000.00
$ 96.00
$ 1,728,000.00
Contribution
$ 144.00
$ 1,728,000.00
$ 144.00
$ 2,592,000.00
Fixed cost:
Factory overhead
$ 29.17
$ 350,000.00
$ 19.44
$ 350,000.00
Sales salaries and commissions
$ 28.33
$ 340,000.00
$ 18.89
$ 340,000.00
Advertising
$ 9.67
$ 116,000.00
$ 6.44
$ 116,000.00
Travel
$ 0.33
$ 4,000.00
$ 0.22
$ 4,000.00
Miscellaneous selling exp
$ 0.19
$ 2,300.00
$ 0.13
$ 2,300.00
Office and officers salaries
$ 27.08
$ 325,000.00
$ 18.06
$ 325,000.00
Supplies
$ 0.50
$ 6,000.00
$ 0.33
$ 6,000.00
Miscellaneous administrative exp
$ 0.73
$ 8,700.00
$ 0.48
$ 8,700.00
Total fixed cost
$ 96.00
$ 1,152,000.00
$ 64.00
$ 1,152,000.00
Profit
$ 48.00
$ 576,000.00
$ 80.00
$ 1,440,000.00
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