1. Simplex Corporation, manufactures and sells a single product. It is in the pr
ID: 2565912 • Letter: 1
Question
1. Simplex Corporation, manufactures and sells a single product. It is in the process of developing a master budget for the first quarter of 2018. Expectations are that variable expenses will be 60% of sales and fixed expenses will be $11,000 per month. The following information will also be used in developing the company's budget for the first three months of 2018:
Three months Jan. Feb. Mar.
Total Units sold (Jan) 1,200 (Feb) 1,500 (Mar)1,800
Selling price (Jan) $25 (Feb) $27 (Mar) $28
Three Months Total- Unit sold ? and Selling Price?
(a) Prepare a budgeted contribution income statement for each of the first three months of 2018 as well as the three-month period in total. Also prepare a schedule showing the contribution margin per unit, the contribution margin ratio, the break-even point in sales dollars, the margin of safety, and the degree of operating leverage for each month and for the three-month period in total.
(b) Refer to the original data. Prepare another set of income statements and schedules assuming that unit sales increase by 5% over previously budgeted amounts (Jan. through March). Round to the nearest dollar.
(c) Refer to the original data. Prepare another set of income statements and schedules assuming that variable expenses, instead of being 60% of sales are 65% of sales.
(d) Refer to the original data. Assume that fixed and variable expenses remain unchanged, prepare another set of income statements and schedules assuming that the original selling prices increase by 15% per unit. Round to the nearest dollar.
Explanation / Answer
Answer for question no.a:
Answer for question no.b:
Answer for question no.c:
Answer for question no.d:
Particulars Jan Feb Mar Total Total units sold(1) 1200 1500 1800 4500 Selling price(2) 25 27 28 Total sales revenue(3)=(1)*(2) 30000 40500 50400 120900 Less: Variable expenses(4) 18000 24300 30240 72540 Contribution(5)=(3)-(4) 12000 16200 20160 48360 Less: Fixed expenses(6) 11000 11000 11000 33000 Net operating income(7)=(5)-(6) 1000 5200 9160 15360 Contribution per unit(8)=(5)/(1) 10 10.8 11.2 10.7466667 Contribution margin ratio(9)=(5)/(3)*100 40% 40% 40% 40% Break even(sales value)(10)=(6)/(9) 27500 27500 27500 Margin of sales(11)=(3)-(10)/(3) 8.33% 32.10% 45.44% Degree of operating leverage(12)=(5)/(7) 12 3.11538462 2.20087336Related Questions
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