#3 and #4 is what I am having trouble with...

Each question refers to the same initial data. Treat each Part individually. Ignore income taxes. Assume no beginning or ending inventories. Calculations and backup should be completed and submitted in Excel. Use proper Contribution Income Statement formatting - example below. Analysis can either be typed into cells in Excel (formatted to be easily legible) or typed into a text box in Excel.

Contribution Margin Format Example:

VOLUME XX

SALE XX

VARIABLE COST (LISTED)XX

VARIABLE COST TOTAL XX

CONTRIBUTION XX

FIXED COSTS (LISTED)XX

FIXED COSTS TOTAL XX

OPERATING INCOME XX

Data for all questions:Curtain City produces fabric curtains for windows. Their curtains are sold at many department stores across the country. The cost of manufacturing and marketing their curtains, at their normal factory volume of 5,000 curtain panels per month, is shown in the table below. These curtains sell for $30 each. Curtain City is making a small profit, but would prefer to increase their Operating Income.

Hint: Fixed costs are shown on a per-unit basis in the table based on normal volume. However, fixed costs as a total do not change when volume changes, so you will need to determine total fixed costs first.

Data for all Questions:

Per UnitPer Unit

Unit Manufacturing Costs:

Variable Materials3.00

Variable Labor4.00

Variable Overhead2.00

Fixed Overhead5.00

Total Unit Manufacturing Cost:14.00

Unit Marketing Costs:

Variable Marketing Costs1.00

Fixed Marketing Cost3.00

Total Unit Marketing Costs:4.00

Questions:

Part 1:

A) show a one-month Contribution Margin Income Statement for the company using the given financial data at their normal factory volume. Include line items for each type of cost as well as subtotals for the variable and fixed costs. B) What is the break-even point in units? C) What is the break-even point in sales dollars? D) Using a one-month Contribution Margin Income Statement, verify that your calculated break-even volume results in Operating Income of Zero. (Contribution Margin statement at the break-even level.)

Part 2:

A home decor company has offered to purchase 8,000 curtain panels (one time in one month) if the sales price was lowered to $20 per curtain panel for that sale. Curtain City's maximum capacity is 10,000 units, and this special sale would not impact the sales prices of their normal sales to the department stores. A) List Curtain City's options based on this Special Sale offer, their maximum capacity, and their usual production (there should be at least 3 options.) B) show a monthly contribution margin income statement for each of the options in A. Label each option and specify which one gives the best results for Curtain City.

Hint: Compare your new contribution margin income statement(s) including the special sale to the company's normal contribution margin income statement (from Part 1).

Part 3:

Curtain City is thinking of increasing sales by offering curtains with metal grommets. The investment needed for adding metal grommets to their manufacturing process would increase fixed overhead costs by $25,000 per month. The variable materials cost (only variable material costs - not all variable costs) would increase by $1.00 per curtain panel. Maximum capacity for the curtains would remain 10,000 units because the same production lines would be used.Market research estimates that the curtains with grommets would sell for $35 each, and volume would increase 20%.A) show a revised monthly Contribution Margin Income Statement to include the revenues, costs and income if Curtain City chooses to manufacture and sell curtains with metal grommets instead of their regular curtains. B) What is the new break-even point in units for the curtains with grommets? C) What is the new break-even point in sales dollars for the curtains with grommets? D) If volume did not increase when making the curtains with grommets (stayed the same as original monthly volume), is Curtain City better off producing curtains with grommets or their basic curtains? Support your answer with data (contribution margin income statement).

Part 4:

Curtain City is thinking of cutting costs by using a different fabric (raw material) supplier. Their variable material costs would decrease by 50% (only variable material costs - not all variable costs). The quality of the fabric is lower, so Curtain City estimates that their additional fixed scrap costs related to the fabric quality would be $5,000 per month. They would not change the pricing of their curtains. Note: Use the initial data provided for all questions. Ignore the metal grommets and special sale data from Parts 2 & 3. A) show a revised monthly Contribution Margin Income Statement to include the revenues, costs and profits of using the different raw material (fabric) supplier. B) If their sales decrease because of the change in quality, how much of a reduction in sales (dollars and units) could Curtain City handle and still keep their net operating income the same as before the supplier change? Show your data in a Contribution Margin Income Statement.