Bedco makes high quality beds. Each bed sells for $1,000. They sold 900 beds in 2020 and 750 beds in 2021. Their costs for both years are presented below:

2020 2021

Cost of Goods Sold $360,000 $300,000

Operating Expenses $220,000 $190,000

Factory Rent $60,000 $60,000

PART A: PROVIDE BEDCOS CONTRIBUTION MARGIN INCOME STATEMENT FOR 2021. Properly label all items to receive credit.

2021

PART B: PROVIDE THE BEDCOS 2021 VARIABLE COST RATIO AND VARIABLE COST/UNIT amounts based on your answer provided in Part A. Show all work to receive any credit. Answers without supporting work will receive zero credit.

Variable Cost Ratio: __________

Variable Cost/unit: ___________

PART C: PROVIDE THE BEDCOS 2021 CONTRIBUTION MARGIN RATIO AND CONTRIBUTION MARGIN/UNIT amounts based on your answer provided in Part A. Show all work to receive any credit. Answers without supporting work will receive zero credit

.Contribution Margin Ratio: _______________

Contribution Margin/unit: ______________

PART D: USING BREAK-EVEN ANALYSIS, DETERMINE BEDCOS 2021 BREAK-EVEN POINTS IN TERMS OF SALES DOLLARS AND NUMBER OF UNITS SOLD based on your answer provided in Part A. . Show all work to receive any credit. Answers without supporting work will receive zero credit.

Break-even PointSales Dollars: _______________

Break-even PointUnits Sold: _________________

PART E: SUPPOSE BEDCO WANTED TO ACHIEVE A TARGET PROFIT OF $445,000 IN 2021. USING TARGET PROFIT ANALYSIS, DETERMINE THE BEDCOS REQUIRED SALES LEVELS (IN TERMS OF BOTH DOLLARS AND UNITS) IF THEY ACHIEVE THAT TARGET PROFIT AMOUNT. Show all work to receive any credit. Answers without supporting work will receive zero credit.

Target ProfitSales Dollars: __________

Target ProfitUnits Sold: ____________

PART F: DETERMINE THE COMPANYS 2021 MARGIN OF SAFETY AND MARGIN OF SAFETY PERCENTAGE based on your answer provided in Part A. Show all work to receive any credit. Answers without supporting work will receive zero credit.

Margin of Safety: ____________

Margin of Safety Percentage: ____________

PART G: COMPUTE BEDCOS 2021 DEGREE OF OPERATING LEVERAGE based on your answer provided in Part A. Show all work to receive any credit. Answers without supporting work will receive zero credit.

Degree of Operating Leverage: ________________

PART H Question 1The president expects sales revenues to increase by 46% in 2022 but Variable Cost/Contribution Margin ratios and Fixed Costs to remain the same as 2021.

Using the Degree of Operating Leverage information calculated in Part G, please provide the following information-- Show all work to receive any credit. Answers without supporting work will receive zero credit.

Expected Percentage Increase in 2022 Net Income: _________________

Expected 2022 Net Income Amount Assuming the 46% Sales Revenue Increase: _____________

Question 2 The sales manager is convinced that a 15% reduction in the selling price per unit, combined with a $44,000 increase in rent to increase factory capacity and production will increase unit sales in 2022 to 1,625 units.

Otherwise, the sales manager expects the 2022 Variable Cost/Contribution Margin ratios and Fixed Costs to remain the same as 2021 amounts.

USING CVP ANALYSIS, please recommend whether the company should adopt this strategy in 2022? Show all work to receive any credit. Answers without supporting work will receive zero credit.

(DO NOT USE THE TOTAL METHOD TO SUPPORT ANSWER----ANSWERS USING THIS METHOD WILL NOT BE GIVEN CREDIT.)