model answer

Assignment No. (1) Ex. (1): Bristol Company's contribution margin income statement is presented below. Sales for the current period consisted of 7,500 units. Compute the company's break-even point in (a) units, and (b) dollars. Compute the margin of safety in (c) dollars and (d) percent. Bristol Company Contribution Margin Income Statement Sales $225,000 Variable costs 135.000 Contribution margin 90.000 Fixed costs 48.000 Net income $42.000 Ex. (2): Magee Windows manufactures two standard size windows, F and M, in the ratio of 5:3. F has a selling price of $150 and M has a selling price of $200. The variable cost of F is $75.00 and the variable cost of M is $90.00. Fixed costs are $352,500. Compute the (a) weighted average contribution margin, (b) break-even point in units, (c) number of units of each product that will be sold at the break-even point. Ex. (3): Wilton Company is analyzing two alternative methods of producing its product. The production manager indicates that variable costs can be reduced 40% by installing a machine that automates production, but fixed costs would increase. Alternative 1 shows costs before installing the machine; Alternative 2 shows costs after the machine is installed. (a) Compute the break-even point in units and dollars for both alternatives. (b) Prepare a forecasted income statement for both alternatives assuming that 30,000 units will be sold. The statements should report sales, total variable costs, contribution margin, fixed costs, income before taxes, income taxes, and net income. Below the income statement, compute the degree of operating leverage. Which alternative would you recommend and why