Answer the exercises with the procedure.

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PROBLEM 1 Cutting Edge Corp. produces sporting equipment. In 2017, the first year of operations, Cutting Edge produced 25,000 units and sold 20,000 units. In 2018, the production and sales results were exactly reversed. In each year, selling price was $100, variable manufacturing costs were $40 per unit, variable selling expenses were $8 per unit, fixed manufacturing costs were $540,000, and fixed administrative expenses were $200,000 Instructions (a) Compute the net income under variable costing for each year. Page 3 ACCT 1162 Problem 3 Lazaro Inc. sells two product lines. The sales mix of the product lines is: Standard, 60%; and Deluxe, 40%. The contribution margin ratio of each line is: Standard, 40%; and Deluxe, 45%. Lazaro's fixed costs are $1,995,000. Instructions What is the dollar amount of Deluxe sales at the break- even point? Page 4 ACCT 1162 Problem 4 DeMont Tax Services provides primarily two lines of service: accounting and tax. Accounting-related services represent 60% of its revenue and provide a contribution margin ratio of 30%. Tax services represent 40% of its revenue and provide a 40% contribution margin ratio. The company's fixed costs are $4,250,000. Instructions (a) Calculate the revenue from each type of service that the company must achieve to break even. (b) The company has a desired net income of $1,700,000. What amount of revenue would De Mont earn from tax services if it achieves this goal with the current sales mix? Ans: NA, LO: 3, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Reporting, AICPA PC: Problem Solving/Decision Making, IMA: Reporting Contribution Weighted-Average Sales Mix Margin Ratio Contribution Margin Ratio Accounting Total break-even sales = Sales Mix Accounting Tax