BE 19-2 Contribution margin

Lanning Company sells 160,000 units at $45 per unit. Variable costs are $27 per unit, and fixed costs are $975,000. Determine (A) the contribution margin ratio, (B) the unit contribution margin, and (C) income from operations.

BE 19-3 Break-even

Bigelow Inc. sells a product for $1,200 per unit. The variable cost is $816 per unit, while fixed costs are $3,120,000. Determine (A) the break-even point in sales units and (B) the break-even point if the selling price were increased to $1,232 per unit.

BE 19-4 Target profit

Ramirez Company sells a product for $80 per unit. The variable cost is $60 per unit, and fixed costs are $4,850,000. Determine (A) the break-even point in sales units and (B) the sales units required for the company to achieve a target profit of $500,000.

PR 19-1A Classify costs

Seymour Clothing Co. manufactures a variety of clothing types for distribution to several major retail chains. The following costs are incurred in the production and sale of blue jeans:

A. Shipping boxes used to ship orders

B. Consulting fee of $200,000 paid to industry specialist for marketing advice

C. Straight-line depreciation on sewing machines

D. Salesperson's salary, $10,000 plus 2% of the total sales

E. Fabric

F. Dye

G. Thread

H. Salary of designers

I. Brass buttons

J. Legal fees paid to attorneys in defense of the company in a patent infringement suit, $50,000 plus $87 per hour

K. Insurance premiums on property, plant, and equipment, $70,000 per year plus $5 per $30,000 of insured value over $8,000,00.

L. Rental costs of warehouse, $5,000 per month plus $4 per square foot of storage used

M. Supplies

N. Leather for patches identifying the brand on individual pieces of apparel

O. Rent on plant equipment, $50,000 per year

P. Salary of production vice president

Q. Janitorial services, $2,200 per month

R. Wages of machine operators

S. Electricity costs of $0.10 per kilowatt-hour

T. Property taxes on property, plant, and equipment

Instructions

Classify the preceding costs as either fixed, variable, or mixed. Use the following tabular headings and place an X in the appropriate column. Identify each cost by letter in the cost column.

Cost Fixed Cost Variable Cost Mixed Cost

PR 19-3A Break-even sales and cost-volume-profit chart (1. 12,000 units)

For the coming year, Cleves Company anticipates a unit selling price of $100, a unit variable cost of $60, and fixed costs of $480,000.

Instructions

1. Compute the anticipated break-even sales (units).

2. Compute the sales (units) required to realize a target profit of $240,000.

3. Construct a cost-volume-profit chart, assuming maximum sales of 20,000 units within the relevant range.

4. Determine the probable income (loss) from operations if sales total 16,000 units.