$1.$ Cigco Co$.$ sells two products, the deluxe model and the standard. The deluxe sells for $$40/$unit$.$ The standard sells for $$20/$unit$.$ Sales are projected to be $1,000$ units for the deluxe and $3,000$ units for the standard. The deluxe model uses $6$ oz$.$ of direct material, the standard model uses $4$ oz$.$ of direct material. The material costs $$\mathrm{.}50/$oz$.$ The deluxe model takes $1/2$ hour of labor to produce, the standard model takes $1/6$ hour of labor to produce. The wage rate is $$12\mathrm{.}00/$hour$.$ Total overhead is $$32,000,$ of which $$24,000$ is fixed. Total selling and administration costs are $$30,000,$ of which $$14,000$ is fixed. Prepare a Traditional Income Statement and a Contribution Margin Income Statement.

Traditional Income Statement Contribution Margin Income Statement

Sales $$100,000$ Sales Revenue $$100,000$

COGS $$53,000\mathrm{.}0$ Variable Costs

Gross Margin $$47,000\mathrm{.}0$ COGS $ $29,000$

S & A costs $$30,000\mathrm{.}0$ S &A $$16,000$ $ $45,000$

Operating Profit $$17,000\mathrm{.}0$ Cont Margin $$55,000$

Fixed Costs

Prod $$24,000$

S & A $$14,000$ $ $38,000.$

Operating Profit $$17,000.$

$2.$a$.$ How many units of the Deluxe must be sold to break even? $\_\_\_380\_\_\_\_\_\_\_$

$2.$b$.$ How many units of the Standard must be sold to break even? $\_\_\_2,850\_\_\_\_\_\_\_\_$

$2.$c$.$ What is the Contribution Margin Ratio for the Deluxe model? $\_\_\_0\mathrm{.}625\_\_\_\_\_\_$

$2.$d$.$ What is the Contribution Margin Ratio for the Standard model? $\_\_\_\_\mathrm{.}5\_\_\_\_\_\_\_$

$2.$e$.$ What sales revenue is required for the Deluxe to achieve $$2,000$ profit for that model? $\_\_$ $$18,400\_$

$2.$f$.$ What sales revenue is required for the Standard to achieve $$2,000$ profit for that model? $\_$ $$61,000\_$

$$

Deluxe units Input cost

Dir Matl $6$ oz $$0\mathrm{.}50$ per oz$.$

Dir Labor $0\mathrm{.}5$ hours $$12\mathrm{.}00$ per hour.

Standard units Input cost

Dir Matl $4$ oz $$0\mathrm{.}50$ per oz$.$

Dir Labor $1/6$ hours $$12\mathrm{.}00$ per hour.

$3.$ a$.$ Cicgo can purchase the Deluxe model for $$11\mathrm{.}50$ per unit. Fixed costs would not be affected, nor would selling and administrative costs. The variable overhead is currently allocated uniformly across both products $($both the deluxe and standard units are assigned the same per unit variable overhead cost$).$ Direct labor and direct material costs are shown above.

Mfg$.$ Cost type Cost per unit

DM $$3\mathrm{.}00$

DL $$6\mathrm{.}00$

MOH $$2\mathrm{.}00$ Deluxe model

Cost to make $$11\mathrm{.}00$ Cost to buy $ $11\mathrm{.}50$

Should Cicgo make or buy the Deluxe model? $\_\_\_\_\_$MAKE$\_\_\_\_\_\_\_\_\_\_$

$3.$ b$.$ Cigco has decided to allocate variable overhead costs by the number of labor hours used in

production. They can purchase the Standard model for $$11\mathrm{.}50$ per unit.

Mfg$.$ Cost type

Cost per unit

DM $$2\mathrm{.}00$

DL $$2\mathrm{.}00$

MOH $$1\mathrm{.}33$ Standard model

Cost to make $$5\mathrm{.}33$ Cost to buy $ $11\mathrm{.}50$

Should Cigco make or buy the Standard unit? $\_\_\_\_\_$ MAKE $\_\_\_\_\_\_\_\_\_2.$a$.$ How many units of the Deluxe must be sold to break even?

$2.$b$.$ How many units of the Standard must be sold to break even?

$2,850$

$2.$c$.$ What is the Contribution Margin Ratio for the Deluxe model?

$0\mathrm{.}62?$

$2.$d$.$ What is the Contribution Margin Ratio for the Standard model?

$2.$e$.$ What sales revenue is required for the Deluxe to achieve $$2,000$ profit for that model?

$$18,400$

$2.$f$.$ What sales revenue is required for the Standard to achieve $$2,000$ profit for that model? $$61,{000}_{?}$

a$.$ CicgQ can purchase the Deluxe model for $$11\mathrm{.}50$ per unit. Fixed costs would not be

affected, nor would selling and administrative costs. The variable overhead is currently allocated

uniformly across both products $($both the deluxe and standard units are assigned the same per

unit variable overhead cost$).$ Direct labor and direct material costs are shown above.

Should Cicgo make or buy the Deluxe model?