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Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to
Carbex, Inc., produces cutlery sets out of high-quality wood and steel. The company makes a Standard set and a Deluxe set and sells them to retail department stores throughout the country. The Standard set sells for $72, and the Deluxe set sells for $87. The variable expenses associated with each set are given below. Variable production costs Sales commissions (21% of sales price) Standard $ 21.00 $ 15.12 Deluxe $ 36.00 $ 18.27 The company's fixed expenses each month are: Advertising Depreciation Administrative $ 111,000 $ 23,500 $ 66,000 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 month-May-are down substantially from April. Sales, in sets, for the last two months are given below: April May Standard 4,600 1,600 Deluxe 2,600 5,600 Total 7,200 7,200 Required: 1-a. Prepare contribution format income statement for April. 1-b. Prepare contribution format income statement for May. 3-a. Compute the break-even point in dollar sales for April. 3-b. Would the break-even point in May be higher or lower than the break-even point in April? Carbex, Inc. Income Statement For April Standard Deluxe Total Amount % Amount % Amount % % % % Variable expenses: % % % % % % % % % % % % Total variable expenses % % % % % % Fixed expenses: Total fixed expenses Carbex, Inc. Income Statement For May Standard Deluxe Total Amount % Amount % Amount % % % % Variable expenses: % % % % % % % % % % % % Total variable expenses % % % % % % Fixed expenses: Total fixed expenses Compute the break-even point in dollar sales for April. (Round intermediate percentage calculations to 1 decimal place and final answer to the nearest whole dollar.) Break-even point in dollar sales Would the break-even point in May be higher or lower than the break-even point in April? Higher O Lower
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