JHJ PUBLISHING production cost info is as follows Raw materials paper Raw materi
ID: 2551971 • Letter: J
Question
JHJ PUBLISHING production cost info is as follows Raw materials paper Raw material ink Direct labor 1 reams $10 each 2 cartridges $20 each 2 hours @$10 each Manufacturing overhead (fixed) $100,000 Administrative expenses (fixed) $40,000 Unit selling price 3 times unit variable cost Determine required production levels 1 Quantity required to loose $100,000 2 Quantity required to break evern 3. Quantity required to earn $1,000,000 4. Net income if only one book is sold S. Complete table below: I INCOME/EXPENSES SALE OF TARGET -REAK- TARGET INCOME OF ONE BOOK$100,00 LOSS OF EVEN 31,000,000 LESS VARIABLE COSTS TOTAL VARIABLE CONTRIBUTION MARGIN Sec 1 Pages: 1 of 2 Words: 89of 119 L9 Print Layout View 888 TA 2 3 5Explanation / Answer
Ans. 1
Sales price three times of variable cost (70X3) = 210
Calculation of variable cost per unit
Material ink (1X10) = 10
Material paper (2X20) = 40
labour (2X10) = 20
Total v/c = 70
Contribution per unit (210-70) = 140
Total fixed cost (100000+40000) = 140000
1. Quantities required for loose $100000 = (140000-100000) / 140 = 286 units
2. Break even qty = 140000/140 = 1000 units
3. Desired sales if desired profit is 1000000 = (140000+1000000)/140 = 8143 units
4. Net income or profit if only one book sold
Contribution = 140
Less: Fixed cost = 140000
Net loss = (139860)
5. Table
Income /Exp. Sale of one Book Target loss of 1lacs, Break even Target profit of 10lacs
Sales 210 60000 210000 1710000
Less: V/c 70 20000 70000 570000
Contribution 140 40000 140000 1140000
Fixed cost 140000 140000 140000 140000
net operating
income/loss (139860) (100000) 0 (1000000)
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