Contribution Income Statement and Analysis

Picnic Time produces a picnic basket that is sold for $132 per unit. Assume the company produced and sold 4,000 baskets during July. There were no beginning or ending inventories. Variable and fixed costs follow.

Variable Cost per Unit				Fixed Costs per Month
Manufacturing:				Manufacturing overhead	$36,000
Direct materials.	$33			Selling and administrative	84,000
Direct labor	23			Total	$120,000
Manufacturing overhead	13	$69
Selling and administrative		4
Total		$73

REQUIRED

a. Prepare a contribution income statement for July.

SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
Less variable costs:
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
Less fixed costs:
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer
SalesDirect materialsDirect laborManufacturing overheadSelling and administrativeContribution marginManufacturing overheadSelling and administrativeProfit	Answer

b. Determine the break-even point in sales dollars. Note: Do not round intermediate calculations Note: Round up to the nearest dollar, enter $80 for $79.2 $Answer

c. Suppose the cost of labor is expected to increase next year. How will this affect the break-even point? Break-even point will AnswerDecreaseIncreaseNot change

d. Determine July's margin of safety in sales dollars. $Answer

e. What dollar sales volume is currently required to obtain a before-tax profit of $120,000? Note: Do not round intermediate calculations Note: Round up to the nearest dollar, enter $80 for $79.2

$Answer