2) Coronado Industries reported the following information for the current year:
ID: 2533857 • Letter: 2
Question
2) Coronado Industries reported the following information for the current year: Sales (44000 units) $880000, direct materials and direct labor $440000, other variable costs $44000, and fixed costs $360000. What is Coronado’s contribution margin ratio? ANSWERS (30%; 70%; 45%; 55%)
3) Variable costs for Marigold Corp. are 30% of sales. Its selling price is $60 per unit. If Marigold sells one unit more than break-even units, how much will profit increase? ANSWERS (42; 18; 36; 200)
4) Sheridan Company requires sales of $1500000 to cover its fixed costs of $700000 and to earn net income of $500000. What percent are variable costs of sales? ANSWERS (33%; 80%; 20%; 47%)
5) Bramble’s CVP income statement included sales of 6200 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $110000. Net income is ANSWERS (620000; 248000; 262000; 138000)
6) Concord Corporation has two divisions; Sporting Goods and Sports Gear. The sales mix is 65% for Sporting Goods and 35% for Sports Gear. Concord incurs $4995000 in fixed costs. The contribution margin ratio for Sporting Goods is 30%, while for Sports Gear it is 50%. What will sales be for the Sporting Goods Division at the break-even point? ANSWERS (4725000; 8775000; 4050000; 7550581)
7) Sheridan Company has sales of $1000000, variable costs of $200000, and fixed costs of $300000. Sheridan’s degree of operating leverage is ANSWERS (4.00; 1.60; 2.67; 14.00)
Explanation / Answer
Answers
A
Sales
$ 8,80,000.00
Variable costs:
B
Direct materials & labor
$ 4,40,000.00
C
Other Variable cost
$ 44,000.00
D=B+C
Total Variable cost
$ 4,84,000.00
E=A-D
Contribution margin
$ 3,96,000.00
F=E/A
Contribution margin ratio
45%
Option C
A
Net Income
$ 5,00,000.00
B
Fixed Cost
$ 7,00,000.00
C=A+B
Contribution margin
$ 12,00,000.00
D
Sales
$ 15,00,000.00
E=D-C
Variable cost
$ 3,00,000.00
F=E/D
% of variable cost to sales
20%
Option C
A
Sales [6200 x 100]
$ 6,20,000.00
B
Variale costs [6200 x $60]
$ 3,72,000.00
C=A-B
Contribution margin
$ 2,48,000.00
D
Fixed cost
$ 1,10,000.00
E=C-D
Net Income
$ 1,38,000.00
Option D
Sporting Goods
Sports Gear
A
Sales Mix
65%
35%
B
Contribution margin ratio
30%
50%
C=A x B
Weighted average contribution margin
19.50%
17.50%
A
Fixed Cost
4995000
B = 19.5% + 17.5%
Weighted average contribution margin
37%
C=A/B
Break Even Units total
13500000
D
Sporting Goods Sales Mix
65%
E=C x D
Break Even Units for Sporting Goods
8775000
Option B
A
Sales
$ 10,00,000.00
B
Variable cost
$ 2,00,000.00
C=A-B
Contribution margin
$ 8,00,000.00
D
Fixed Costs
$ 3,00,000.00
E
Net Income
$ 5,00,000.00
F=C/E
Degree of Operating Leverage
1.6
Option B
A
Sales
$ 8,80,000.00
Variable costs:
B
Direct materials & labor
$ 4,40,000.00
C
Other Variable cost
$ 44,000.00
D=B+C
Total Variable cost
$ 4,84,000.00
E=A-D
Contribution margin
$ 3,96,000.00
F=E/A
Contribution margin ratio
45%
Option C
A
Net Income
$ 5,00,000.00
B
Fixed Cost
$ 7,00,000.00
C=A+B
Contribution margin
$ 12,00,000.00
D
Sales
$ 15,00,000.00
E=D-C
Variable cost
$ 3,00,000.00
F=E/D
% of variable cost to sales
20%
Option C
A
Sales [6200 x 100]
$ 6,20,000.00
B
Variale costs [6200 x $60]
$ 3,72,000.00
C=A-B
Contribution margin
$ 2,48,000.00
D
Fixed cost
$ 1,10,000.00
E=C-D
Net Income
$ 1,38,000.00
Option D
Sporting Goods
Sports Gear
A
Sales Mix
65%
35%
B
Contribution margin ratio
30%
50%
C=A x B
Weighted average contribution margin
19.50%
17.50%
A
Fixed Cost
4995000
B = 19.5% + 17.5%
Weighted average contribution margin
37%
C=A/B
Break Even Units total
13500000
D
Sporting Goods Sales Mix
65%
E=C x D
Break Even Units for Sporting Goods
8775000
Option B
A
Sales
$ 10,00,000.00
B
Variable cost
$ 2,00,000.00
C=A-B
Contribution margin
$ 8,00,000.00
D
Fixed Costs
$ 3,00,000.00
E
Net Income
$ 5,00,000.00
F=C/E
Degree of Operating Leverage
1.6
Option B
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