Bill\'s Ball Bearings buys ball bearings in bulk from Beijing. Bill\'s box them
ID: 2539492 • Letter: B
Question
Bill's Ball Bearings buys ball bearings in bulk from Beijing. Bill's box them in up in 1 pound boxes for shipping across the U.S. They have 2 Products - Basic & Beautiful Here are the pertinent data: Basic Beautiful Sales price per box $4.00 $5.00 Variable Costs $2.95 $3.80 Fixed Costs $15,000.00 Please answer the following: Show your work! 1. What is the Contribution Margin per box of bearings? 2. What is the Break-even Point in boxes of bearings sold? If the ratio of sales is 3 basic for every 2 Beautiful boxes sold 3. Prepare an Income Statement showing the Break-even Point 4. How many boxes of bearings need to be sold to make $2,000 in Profit? Use an income tax rate of 40% 5. Prepare an Income Statement showing the $2,000 Profit ? Bill's Ball Bearings buys ball bearings in bulk from Beijing. Bill's box them in up in 1 pound boxes for shipping across the U.S. They have 2 Products - Basic & Beautiful Here are the pertinent data: Basic Beautiful Sales price per box $4.00 $5.00 Variable Costs $2.95 $3.80 Fixed Costs $15,000.00 Please answer the following: Show your work! 1. What is the Contribution Margin per box of bearings? 2. What is the Break-even Point in boxes of bearings sold? If the ratio of sales is 3 basic for every 2 Beautiful boxes sold 3. Prepare an Income Statement showing the Break-even Point 4. How many boxes of bearings need to be sold to make $2,000 in Profit? Use an income tax rate of 40% 5. Prepare an Income Statement showing the $2,000 Profit ?Explanation / Answer
Answer 1: Calculation of Contribution Margin
Answer 2:Calculation of Breakeven Point (Boxes)
Weighted Average Contribution Margin = (1.05*3/5)+(1.20*2/5) = $1.11
Breakeven (Boxes) = Fixed Cost / Weighted Average CM = 15000 / 1.11 = 13513.51 units
No. of Boxes of Basic = 13513.51 * 3/5 = 8108.11~8108 units
No. of Boxes of Beautiful = 13513.51 * 2/5 = 5405.41~5405 units
Answer 3:Income Statement showing Breakeven Point
Answer 4:Boxes of bearings need to be sold to make $2,000 in Profit
Profit needed after tax is $2,000
Tax rate is 40%
Profit to be earned before tax is $ 3,333.33 (2,000/0.60)
Total boxes to be sold = (15000 + 3333.33)/1.11 = 16516.51 units
No. of Boxes of Basic = 16516.51 * 3/5 = 9909.91~9910 units
No. of Boxes of Beautiful = 16516.51 * 2/5 = 6606.61~6607 units
Answer 5:
Income statement showing profit of $ 2000
Decimal Differences is due to approximation of units.
Basic Beautiful Sales Price 4.00 5.00 Variable Cost 2.95 3.80 Contribution Margin 1.05 1.20Related Questions
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