Question
Kingston Bakers Ltd. most recent monthly contribution format income statement is given below for 6000 units $ Sales (6000 units) 90,000 Less variable expenses 67,500
Kingston Bakers Ltd. most recent monthly contribution format income statement is given below for 6000 units
$ Sales (6000 units) 90,000 Less variable expenses 67,500 Contribution margin 22,500 Less fixed expenses 18,000 Net Income 4,500 Calculate: (a) the company's contribution margin ratio? (2 marks) (b) the breakeven points in units and in dollar sales? (4 marks) (c) the margin of safety in units and dollar value if the companys intention is to sell 10000 units. (4 marks) (d) How many units would the company need to sell if it wishes to make a profit of $25000? (2 marks) (e) If unit sales were increased by 25% and fixed expenses were reduced by $4,000, what would be the company's expected net income? (Prepare a contribution margin income statement to represent your response) (6 marks) (b) The Ryan Corporation manufactures a single product with the following unit cost for 5000 units: $ Direct Materials 80 Direct labour 40 Manufacturing overheads (40% variable) 120 Selling expenses (60% variable) 40 Administrative expenses (20% variable) 20 Total unit cost 300 A company recently approached Ryan Corporation about buying 1000 units for $195. Ryan currently sells the models to dealers for $210 per unit. Ryans capacity is sufficient to produce the extra 1000 units. (i) Should Ryan accept this special order? Justify your answer. (9 marks) (ii) Determine the minimum price that Ryan should sell each unit for in order to make a profits by $10000 on the special order (3 marks) (Total 30 marks)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started