Magnificent Modems, Inc. makes modem cards that are used in notebook computers. The company completed the following transactions during 2017. All purchases and sales were made with cash. 1. Acquired $750,000 of cash from the owners. 2. Purchased $270,000 of manufacturing equipment. The equipment has a $30,000 salvage value and a four-year useful life Label the purchase of the equipment as Event 2a and the recognition of depreciation as Event 2b 3. The company started and completed 5,000 modems. Direct materials purchased and used amounted to $40 per unit. 4. Direct labor costs amounted to $25 per unit. 5. The cost of manufacturing supplies used amounted to $4 per unit. 6. The company paid $50,000 to rent the manufacturing facility. 7. Magnificent sold all 5,000 units at a cash price of $120 per unit. (Hint It will be necessary to determine the manufacturing costs in order to record the cost of goods sold.) 8. The sales staff was paid a $6 per unit sales commission. 9. Paid $39,000 to purchase equipment for administrative offices. The equipment was expected to have a $3,000 salvage value and a three-year useful life. Label the purchase of the equipment as Event 9a and the recognition of depreciation as Event 9b 0. Administrative expenses consisting of office rental and salaries amounted to $71,950 Required a. Based on these data, identify each cost incurred by the company as(1) fixed versus variable relative to the number of units produced and sold; and(2) product versus selling, general, and administrative (SG&A). The solution for the first item is shown as an example b. Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7000, and 8,000. Complete this question by entering your answers in the tabs below. Required A Required B Based on these data, identify each cost incurred by the company as (1) fixed versus variable relative to the number of units produced and sold; and (2) product versus selling, general, and administrative (SG&A) Cost Item Depreciation on manufacturing equipment Direct materials Direct labor Manufacturing supplies Rent on manufacturing facility Sales commissions Depreciation on administrative equipment Administrative costs (rent and Salaries) Fixed cost Product cost Required A Required B > Complete this question by entering your answers in the tabs below. Required ARequired Complete the following table to indicate the product cost per unit assuming levels of production of 5,000, 6,000, 7,000, and 8 000. Round Cost per unit decimal places , . to 2 Production Levels Per Unit 5,000 6,000 7,000 8,000 Variable cost Fixed cost Total (Cost of goods sold) Cost per unit $ 455,000 91.00 Required A Required B Massey Company reported the following data regarding the product it sells: Sales price Contribution margin ratio Fixed costs 25 40% $810,000 Required Use the contribution margin ratio approach and consider each requirement separately. a. What is the break-even point in dollars? In units? b. To obtain a profit of $270,000, what must the sales be in dollars? In units? c. If the sales price increases to $30 and variable costs do not change, what is the new break- even point in dollars? In units? a. Break-even point in dollars Break-even point in units b. Sales in dollars Sales in units c. Break-even point in dollars Break-even point in units
