2. Break-Even Sales

Currently, the unit selling price of a product is $380, the unit variable cost is $310, and the total fixed costs are $1,001,000. A proposal is being evaluated to increase the unit selling price to $420.

a. Compute the current break-even sales (units). units

b. Compute the anticipated break-even sales (units), assuming that the unit selling price is increased to the proposed $420, and all costs remain constant. units

3. Break-even analysis for a service company

Rotelco is one of the largest digital wireless service providers in the United States. In a recent year, it had approximately 100 direct subscribers (accounts) that generated revenue of $59,400. Costs and expenses for the year were as follows:

Cost of revenue	$26,100
Selling, general, and administrative expenses	18,400
Depreciation	6,500

Assume that 70% of the cost of revenue and 25% of the selling, general, and administrative expenses are variable to the number of direct subscribers (accounts). In part (a) and (b), round all interim calculations and final answers to one decimal place.

a. What is Rotelco's break-even number of accounts, using the data and assumptions above? Round to the nearest whole number. accounts

b. How much revenue per account would be sufficient for Rotelco to break even if the number of accounts remained constant? Round to the nearest dollar. $ per account

4. Sales Mix and Break-Even Sales

Dragon Sports Inc. manufactures and sells two products, baseball bats and baseball gloves. The fixed costs are $412,300, and the sales mix is 30% bats and 70% gloves. The unit selling price and the unit variable cost for each product are as follows:

Products	Unit Selling Price		Unit Variable Cost
Bats	$40		$30
Gloves	100		60

a. Compute the break-even sales (units) for both products combined. units

b. How many units of each product, baseball bats and baseball gloves, would be sold at break-even point?

Baseball bats	units
Baseball gloves	units

5. Margin of Safety

a. If Canace Company, with a break-even point at $560,000 of sales, has actual sales of $700,000, what is the margin of safety expressed (1) in dollars and (2) as a percentage of sales? Round the percentage to the nearest whole number.

1. $

2. %

b. If the margin of safety for Canace Company was 45%, fixed costs were $1,816,650, and variable costs were 55% of sales, what was the amount of actual sales (dollars)? (Hint: Determine the break-even in sales dollars first.) $

6. Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:

		Estimated Fixed Cost			Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials				$13
	Direct labor				9
	Factory overhead	$188,000			6
Selling expenses:
	Sales salaries and commissions	39,100			3
	Advertising	13,200
	Travel	2,900
	Miscellaneous selling expense	3,200			3
Administrative expenses:
	Office and officers' salaries	38,200
	Supplies	4,700			1
	Miscellaneous administrative expense	4,460			1
	Total	$293,760			$36

It is expected that 8,840 units will be sold at a price of $90 a unit. Maximum sales within the relevant range are 11,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
			$
Cost of goods sold:
		$
Cost of goods sold
Gross profit			$
Expenses:
Selling expenses:
	$
Total selling expenses		$
Administrative expenses:
	$
Total administrative expenses
Total expenses
Income from operations			$

2. What is the expected contribution margin ratio? Round to the nearest whole percent. %

3. Determine the break-even sales in units and dollars.

Units	units
Dollars	units

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $

5. What is the expected margin of safety in dollars and as a percentage of sales?

Dollars:	$
Percentage: (Round to the nearest whole percent.)		%

6. Determine the operating leverage. Round to one decimal place.

Contribution Margin and Contribution Margin Ratio For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions): Sales $38,700 Food and packaging $13,889 Payroll 9,800 Occupancy (rent, depreciation, etc.) 8,251 General, selling, and administrative expenses 5,600 $37,540 Income from operations $1,160 Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses. a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) $ x million b. What is Wicker Company's contribution margin ratio? Round to one decimal place. X % c. How much would income from operations increase if same-store sales increased by $2,300 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. x million