7 Profit Planning 8 Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis 9 based on the following assumptions 10 Note. Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round 11 up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the 12 number of units and then multiply by the selling price per unit. 13 22 1. For 20x2 the selling price per lamp will be $45.00 What is the projected contribution margin and contribution 23 margin ratio for each lamp sold? 24 25 26 35 86 7 8 9 8 Contribution Margin per unit (Round to seven places, S###) 15.01) Contribution Margin Ratio (Round to seven places,% is two of those places ## %) 5023 0 1 2 12 For 20x2 the selling price per lamp will be $45.00. How many lamps must be sold to breakeven? Breakeven sales in units (Round up to zero places, ### ### units) 15032 3 For 20x2 the selling price per lamp will be $45.00. The desired operating income in 20X2 is $268.750. What would sales in units have to be in 20x2 to reach the profit goal? Sales in units (Round up to zero places, ### ### units) 15.04) 4. 4 For 20x2 the selling price per lamp will be $45.00. The company would like to have a operating income equal to 32.00% of sales. If that is to be achieved, what would be the sales in units in 20x2? Sales in units (Round up to zero places, ### ### units) {6.01) 5. If the company believed that it could only sell 25,000 lamps, what would the new selling price have to be so that the new contribution margin per unit is equal to last year's contribution margin per unit? {6.02) 6. New Selling Price (Round up to two places, S########) For 20x2 the selling price per lamp will be 545.00 and the effective tax rate is 37% How many units must be sold to generated a operating income of $180,000 after taxes? Sales in units (Round up to zero places, ########units) {6.03) 7. If the company believes that the demand will be 27,500 units for the year. What selling price per lamp, rounded to two places, would generate a operating income of $821,500? New selling price per lamp (Round up to two places, S######## {6.04) 7 8 The projected cost of a lamp is calculated based upon the projected increases or decreases to 9 current costs. The present costs to manufacture one lamp are: 10 11 Figurines $9.2000000 per lamp 18 Electrical Sets 1.2500000 per lamp 19 Lamp Shade 6.0000000 per lamp 20 Direct Labor 2.2500000 per lamp (4 lamps./hr.) 21 Variable Overhead: 0 2250000 per lamp 22 Fixed Overhead 10.0000000 per lamp (based on normal capacity of 25.000 lamps) 29 30 Cost per lamp $28.9250000 per lamp 31 32 Expected increases for 20x2 33 When calculating projected increases round to SEVEN decimal places 500000000 40 41 1. Material Costs are expected to increase by 6.40% 42 43 2. Labor Costs are expected to increase by 2.50% 44 51 3. Variable Overhead is expected to increase by 3.50%, 52 53 4. Fixed Overhead is expected to increase to 5260,000 54 55 5. Fixed selling expenses are expected to be $37,000 in 20x2 62 63 6. Variable selling expenses (measured on a per lamp basis) are expected to increase 64 by 2.50% 65 66 7. Fixed Administrative expenses are expected to increase by $18,000 73 The total administrative expenses for 20x0 were $41,205.00, when 74 23,500 units were sold. Use the High-Low method to calculate 75 the total fixed administrative expense. 76 77 8. Variable administrative expenses (measured on a per lamp basis) are expected to 84 increase by 5.00%. The total administrative expenses for 20x0 were 85 $41,205.00, when 23,500 units were sold. Use the High-Low method to calculate 86 the variable administrative expense per lamp. 87 88 On the following schedule develop the following figures: 95 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 96 97 2- 20x2 Projected Variable Unit Cost per lamp 98 99 3- 20x2 Projected Fixed Costs. 106 Projected Income Statement For the Period Ending December 31, 20x1 $ 1.125,000.00 7723.250.00 $ 401.750.00 Sales 25.000 lamps @ $45.00 Cost of Goods Sold @ $28.93 Gross Profit Selling Expenses Fixed Variable [Commission per unit) $3.15 Administrative Expenses Total Selling and Administrative Expenses: Net Profit $ 23,000.00 78.750.00 $ 101,750.00 41,250.00 143,000.00 $259,750.00 I See The Light Projected Balance Sheet As of December 31, 20x1 $ 34 710.00 67 500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Figurines Electrical Sets Work in Process Finished Goods Total Current Assets 500 @ $9.20 500 @ $1.25 0 3000 @ $28 3250 4.600.00 625.00 86,775.00 $ 194,210.00 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6.800.00 13.200.00 $ 207410.00 54,000.00 54,000.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity $ 12,000.00 141410.00 153.410.00 207.410.00 7 Profit Planning 8 Big Al is about to begin work on the budget for 20x2 and they have requested that you prepare an analysis 9 based on the following assumptions 10 Note. Remember, that we cannot sell part of a lamp, therefore to find the number of units you have to round 11 up to the next complete unit. Furthuremore, to find the required sales in dollars it may be easier to find the 12 number of units and then multiply by the selling price per unit. 13 22 1. For 20x2 the selling price per lamp will be $45.00 What is the projected contribution margin and contribution 23 margin ratio for each lamp sold? 24 25 26 35 86 7 8 9 8 Contribution Margin per unit (Round to seven places, S###) 15.01) Contribution Margin Ratio (Round to seven places,% is two of those places ## %) 5023 0 1 2 12 For 20x2 the selling price per lamp will be $45.00. How many lamps must be sold to breakeven? Breakeven sales in units (Round up to zero places, ### ### units) 15032 3 For 20x2 the selling price per lamp will be $45.00. The desired operating income in 20X2 is $268.750. What would sales in units have to be in 20x2 to reach the profit goal? Sales in units (Round up to zero places, ### ### units) 15.04) 4. 4 For 20x2 the selling price per lamp will be $45.00. The company would like to have a operating income equal to 32.00% of sales. If that is to be achieved, what would be the sales in units in 20x2? Sales in units (Round up to zero places, ### ### units) {6.01) 5. If the company believed that it could only sell 25,000 lamps, what would the new selling price have to be so that the new contribution margin per unit is equal to last year's contribution margin per unit? {6.02) 6. New Selling Price (Round up to two places, S########) For 20x2 the selling price per lamp will be 545.00 and the effective tax rate is 37% How many units must be sold to generated a operating income of $180,000 after taxes? Sales in units (Round up to zero places, ########units) {6.03) 7. If the company believes that the demand will be 27,500 units for the year. What selling price per lamp, rounded to two places, would generate a operating income of $821,500? New selling price per lamp (Round up to two places, S######## {6.04) 7 8 The projected cost of a lamp is calculated based upon the projected increases or decreases to 9 current costs. The present costs to manufacture one lamp are: 10 11 Figurines $9.2000000 per lamp 18 Electrical Sets 1.2500000 per lamp 19 Lamp Shade 6.0000000 per lamp 20 Direct Labor 2.2500000 per lamp (4 lamps./hr.) 21 Variable Overhead: 0 2250000 per lamp 22 Fixed Overhead 10.0000000 per lamp (based on normal capacity of 25.000 lamps) 29 30 Cost per lamp $28.9250000 per lamp 31 32 Expected increases for 20x2 33 When calculating projected increases round to SEVEN decimal places 500000000 40 41 1. Material Costs are expected to increase by 6.40% 42 43 2. Labor Costs are expected to increase by 2.50% 44 51 3. Variable Overhead is expected to increase by 3.50%, 52 53 4. Fixed Overhead is expected to increase to 5260,000 54 55 5. Fixed selling expenses are expected to be $37,000 in 20x2 62 63 6. Variable selling expenses (measured on a per lamp basis) are expected to increase 64 by 2.50% 65 66 7. Fixed Administrative expenses are expected to increase by $18,000 73 The total administrative expenses for 20x0 were $41,205.00, when 74 23,500 units were sold. Use the High-Low method to calculate 75 the total fixed administrative expense. 76 77 8. Variable administrative expenses (measured on a per lamp basis) are expected to 84 increase by 5.00%. The total administrative expenses for 20x0 were 85 $41,205.00, when 23,500 units were sold. Use the High-Low method to calculate 86 the variable administrative expense per lamp. 87 88 On the following schedule develop the following figures: 95 1- 20x2 Projected Variable Manufacturing Unit Cost of a lamp. 96 97 2- 20x2 Projected Variable Unit Cost per lamp 98 99 3- 20x2 Projected Fixed Costs. 106 Projected Income Statement For the Period Ending December 31, 20x1 $ 1.125,000.00 7723.250.00 $ 401.750.00 Sales 25.000 lamps @ $45.00 Cost of Goods Sold @ $28.93 Gross Profit Selling Expenses Fixed Variable [Commission per unit) $3.15 Administrative Expenses Total Selling and Administrative Expenses: Net Profit $ 23,000.00 78.750.00 $ 101,750.00 41,250.00 143,000.00 $259,750.00 I See The Light Projected Balance Sheet As of December 31, 20x1 $ 34 710.00 67 500.00 Current Assets Cash Accounts Receivable Inventory Raw Material Figurines Electrical Sets Work in Process Finished Goods Total Current Assets 500 @ $9.20 500 @ $1.25 0 3000 @ $28 3250 4.600.00 625.00 86,775.00 $ 194,210.00 Fixed Assets Equipment Accumulated Depreciation Total Fixed Assets Total Assets $ 20,000.00 6.800.00 13.200.00 $ 207410.00 54,000.00 54,000.00 Current Liabilities Accounts Payable Total Liabilities Stockholder's Equity Common Stock Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity $ 12,000.00 141410.00 153.410.00 207.410.00