Accounting 122 Group Project 2

Cascade Company estimated the following variable and fixed cost for the only product it produces:

	Variable Cost Per Unit	Fixed Cost
Direct Materials	$132.30	$ 0
Direct Labor	$115.30	$ 0
Factory Overhead	$24.50	$264,000
Sales Salaries and Commissions	$12.70	$245,000
Advertising	$0	$75,000
Travel	$0	$39,500
Misc. Selling Expenses	$6.70	$24,500
Office and Officer Salaries	$0	$220,000
Supplies	$6.30	$15,000
Misc. Administrative Expenses	$2.20	$17,000

Prepare an estimated Contribution Margin Income Statement for the year ended December 31, 2018. (6,000 units are to be produced and sold). Assume the estimated sales price will be $500 per unit. Include one category for variable cost and one category for fixed cost.

Compute the break-even point in units and sales dollars

Compute the break-even point in units and sales dollars assuming the changed facts below:

The sales staff will now handle all of the advertising cost and their sales commission will be increased to 10% of every sales dollar. Remember, the sales price per unit is $500.

The sales staff will also have their fixed salaries decrease by $100,000.

All other facts will remain unchanged.

Which alternative would you select assuming that Cascade will sell at least 5,000 units? Why?

Referring to the original facts; what is the sales in units and sales dollars required to generate a 12% Operating Income as a percentage of Sales?