Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them

Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a standard cutlery set and a deluxe set and sells them to retail department stores throughout the country. The standard set sells for $76, and the deluxe set sells for $91. The variable expenses associated with each set are given below.

Standard Deluxe
Production costs $ 23.00 $ 38.00
Sales commissions (23% of sales price) $ 17.48 $ 20.93

The companys fixed expenses each month are:

Advertising $ 113,000
Depreciation $ 24,100
Administrative $ 67,000

Salespersons are paid on a commission basis to encourage them to be aggressive in their sales efforts. Mary Parsons, the financial vice president, watches sales commissions carefully and has noted that they have risen steadily over the last year. For this reason, she was shocked to find that even though sales have increased, profits for the current monthMayare down substantially from April. Sales, in sets, for the last two months are given below:

Standard Deluxe Total
April 4,800 2,800 7,600
May 1,800 5,800 7,600

Required:
1a.

Prepare contribution format income statements for April. Round "Total percent" answers to 1 decimal place (i.e .1234 should be entered as 12.3).

image text in transcribed

1b.

Prepare contribution format income statements for May. Round "Total percent" answers to 1 decimal place (i.e .1234 should be entered as 12.3).

image text in transcribed

3a.

Compute the break-even point in dollar sales for April. (Round intermediate percentage calculations to 1 decimal place.)

Break-even point in dollar sales =
Carbex, Inc. Contribution Income Statement for April Standard Deluxe Total Amount Amount Amount Sales Variable expenses Production Sales commission Total variable expenses Contribution margin Fixed expenses 0.0 %, 0%, 0%, 0.0 % Advertising Depreciation Administrative Total fixed expenses Net operating income

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Accounting questions

Question

a neglect of quality in relationship to international competitors;

Answered: 1 week ago